"It just underscores some of the sentiment that we've seen out there," Lin says. "The publishers will not come out and ignore the 360, but you really have to look whether they'll be designing exclusive content aimed at the Xbox 360 target audience."

Winning exclusive third-party games is a real measure of success because it shows publishers are betting Xbox 360 will be such a big hit that they can initially forgo sales on rival consoles.

Not surprisingly, the hottest game exclusively for the original Xbox, Halo 2, was developed by Microsoft itself. The game was such a blockbuster at launch that it helped Microsoft's home and entertainment division post its first profitable quarter.

But outside of the Halo franchise, Microsoft's in-house games have suffered from mixed reviews. "They had a couple of phenomenal successes and a bunch of very poor performances," Pachter says of Microsoft's in-house games.

On the other hand, "Sony's first-party capacity is about 10 times what Microsoft's is," he adds. And "Sony has the Japanese boy's club" of developers, who Pachter expects will still throw more weight behind Sony than Microsoft.

Microsoft is remaining tight-lipped about its timeline for releasing Halo 3. But Chairman and Co-Founder Bill Gates has suggested timing it to coincide with Play Station 3's launch would be perfect.

Such a move would steal some thunder from Sony and take the next-generation battle up to another level, while bringing Microsoft that much closer to accomplishing its conquest in this next-generation console battle.

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