Unfortunately it's the latter not the former. I've stumbled upon an article on a website called insidekinect.com. This article relates to something I recently talked about on an episode of our podcast (@37:40); Game interconnectivity.
I know we here at WBMT aren't known for our fanboyism of Microsoft or any of it's products, but I'll have you all know that I own an XBOX 360, and actually hold no scorn for the system myself. I've said this again and again. I go where the games are.
Back to Microsoft. One great thing about Microsoft, like some Western MMO developers,is that they actually listen to their fans. They tend to do a pretty good job of taking the wants of their core audience into consideration (more so than other companies anyway). Lets take for example the first Xbox; Sure it wasn't perfect but it was a damn great first shot at the game console market (or second if you count their involvement with the Dreamcast). They were the first to put a hard drive as standard on the console itself. They understood the importance of connectivity between gamers via lan and online. They made XboxLive very simple and very functional and they continue to ad features to XBL that gamers actually want.
Now it seems they are nurturing the more casual audience to the detriment of all us hard core gamers but look at what they are doing! Eventually they'll realize just how slutty those casual gamers are and Microsoft will come running back. Sure they'll be a little tainted but they'll have learned a few new tricks ;).