Here are The Top 5 Things I Learned from Microsoft’s E3 2008 Press Conference:

5. Those who play together…: Online multiplayer used to be a developer’s number one bullet point. If you shipped a title without it, the professional game critics immediately dropped a couple points from your score, even if the game design didn’t necessarily warrant the feature. Nowadays, online multiplayer is old hat and developers have become hip to the fact that folks tend to gravitate to one or two online games and ignore the rest (meaning titles like Halo 3 and Call of Duty 4 reap heavy rotation long after their single-player campaigns have exhausted). That’s not to say developers won’t try and lure gamers over to their unique brand of fragfests, but for the most part, gamers know which series they’ll pledge their allegiance to.

Me — I’ve sort of had my fill on the pure multiplayer melee madness. I’ll dip my toes in the waters, but I’m just not hardcore enough to know whether the kids think I’m kewl or a n00b they can pwn. That said, I do like gaming alongside my buddies — with the ability to chat away on MS proprietary voice channels. Which is why I am thrilled at Microsoft’s new marching orders to offer up the online co-op campaign experience in a number of their titles.

In October, Microsoft will ship Fable II, the sequel to the hit action RPG that struck gold on the original Xbox. I’ll write more about the title in my “Top 5 360 games I’ve just got to play” piece, but what has me most excited is the online co-op. Peter Molyneux confirmed yesterday that Fable II will offer a seamless invite process — dispensing with clunky menus and invites. Within the user’s own unique game world, they can see purple orbs floating through space that represent people on their friend’s list. In order to invite a friend in, a player simply walks up to an orb and sends an invite. If their friend accepts, they’ll immediately show up in the player’s game, where they can play all or part of the campaign alongside them. In addition, each player’s world changes depending on the actions they perform in the game, so a player can act as a tour guide and walk their friend through their unique environment — pointing out the sites.

Continuing the trend, Microsoft and Silicon Knights release the sci-fi adventure, Too Human, in August. The game, which has been described as an action RPG dungeon crawler akin to the old Diablo games allows for similar drop-in anytime co-op.

In November, Microsoft and Epic Games launch the much anticipated sequel, Gears of War 2. In addition to the two-player online co-op campaign mode, there’s a new co-op mode called Horde which supports up to five players. Not much was revealed about this other than it’s a separate game from the main campaign — which should add some longevity to the title.

From the third party camp, I was legitimately impressed to see online co-op integrated into Resident Evil 5. I’m a HUGE fan of Resident Evil 4 (I felt it really reinvented a creaky series), and RE5 looks like a refinement of everything the last installment did so well. Being able to play through this action-thriller with a buddy alongside just makes my anticipation for this title grow. We still have some time to wait though — it doesn’t drop until March 13, 2009. Yes, that’s a Friday.

4. Blu-Ray ban: Blu-Ray is the new Betamax. There, I said it. Earlier this year, Microsoft hit a hurdle in the hi-def wars when the video basket ino which it put all its eggs (HD-DVD) completely unraveled. Once the big box chains (Wal-Mart, Best Buy) dropped support for the format in favor of the Sony-backed Blu-Ray, Toshiba exited the business and those $200 HD-DVD add-ons suddenly became expensive paperweights. Since then, speculation has run rampant that Microsoft would swallow its lumps, toss some coin at its chief competitor and offer a Blu-Ray add-on of its own in order to stay in line with the one deciding advantage the PS3 currently holds court on. In fact, the popular scuttlebutt was that Microsoft HAD to offer Blu-Ray to head off the slow build of steam that Sony was amassing after their initial rocky start.

But all this time I’ve looked at Blu-Ray as this generation’s Laser-Disc. It’s a nice piece of tech that looks good in a showroom but will only really appeal to the hardcore niche techie crowd that has to buy every new innovation (as they read this, they toss a forlorn glance at their collection of Mini-Discs.) After all, DVDs really only hit mainstream in the last five years. (Mainstream is the point where your mom and dad opts to rent a DVD over a VHS tape when perusing Blockbuster.) Granted, DVD hunkered down in the American household much faster than VHS, but DVD is arguably the first generation of video hardware where purchasing movies (as opposed to solely renting them) is the norm — with the price point of most new releases an attractive $13. People have begun to amass libraries the way they spotlighted their CD (or record) collections. The last thing the mass audience is going to do is run right out and replace all those flicks for the newer, better picture. Sure — you and I can see a clear cut difference afforded by the hi-def Blu-Ray image, but I guarantee you we’re in the minority.

That’s why I’ve looked at digital distribution of flicks as the true next generation for film and video presentation. The signs are clear. iTunes and MP3s are putting music stores out of business. Digital distribution of music has definitely hit the mainstream and has changed the way the consumer thinks — it’s no longer such a strange idea to not physically own (and hold) your music media. In fact, it’s kinda nice not having to fumble for CDs while jockeying your java on your lap. And it’s not just guys like me that notice the difference. Soccer moms are so much happier to have their hands free — leaving them with an extra limb to fix their hair while ferrying from Zumba class to the kid’s field hockey game.

All this rambling preamble is pure set-up for Microsoft’s genius move to partner with Netflix and offer digital distribution of films (from the extensive Netflix catalog) direct to your Xbox — starting this fall. No more mailing. No more waiting for your place in the queue. No more handling physical DVD media that has passed through untold number of hands and, hence, no more sudden onset Bird Flu.

This is a huge coup for Microsoft. It basically tells Sony, “Keep your pretty niche, Blu-Ray. We’re leap-fogging into the true next generation.”

The nice thing about this arrangement is that Netflix subscribers will not pay anything extra for the service. In addition, they can share the film with up to eight other users (by sending it direct to them) and all of them can watch the film together — bringing the concept of a group movie night much easier to pull together (especially for those of us who have troubles locating babysitters). If you’re one of those who like to talk during a movie, everyone can stay connected with their headsets and chat away. Word of warning — I’ll mute ya!

3. GlaDOS is still alive: The Xbox Live Arcade service has been a wealth of enjoyment for the last several years and has been a prime place to feature some of the smaller scale, though no less enjoyable, games that have come from independent developers. Sure, XBLA also plays host to classic game ports and some titles from name developers, but its biggest triumph has been offering an avenue for distribution for those smaller titles that really seemed to lose their way when we made the transition from the “bit” generations to our current age of hi-def play.

One of the big announcements yesterday was that the hit game, Portal, which began life as a student project driven off the Half-Life 2 engine, would make its way to XBLA as an enhanced port. Basically, we’ll get the original Portalgame in addition to some new levels designed specifically for the service. This is a nice treat and continues the trend of leveraging XBLA to provide unique game experiences.

I played Portal when it shipped on The Orange Box disk, and I found it to be one of the more enjoyable game experiences I’ve had in the last few years. Essentially, it’s a puzzle game dressed up in first-person shooter clothes. Armed with a special gun that enables the player to open portals on most any surface, the player must navigate an escalating series of puzzle rooms in a bid to escape their confinement in a mysterious installation.

While the puzzle design is great (real head scratchers but not head bangers), the game really won me over on its aesthetic world design. The guys who developed this not only know how to design gameplay, they also know how to weave a decent tale — and the story you play through in Portal is equal parts chilling and hilarious. The sentient AI, GlaDOS, is as memorable a computerized character as HAL in “2001.”

This was a nice surprise during the conference, and to see it included in the keynote address shows Microsoft is committed to providing these indie games with safe haven.

2. Microsoft really wants to be Nintendo: I’ve heaped a ton of praise at Microsoft and deservedly so. They had a much better press conference than last year’s aimless, boring show. This year they featured some stellar titles (most of which are coming soon) and ended with a genuine shock (more to come in a moment).

But they stumbled a bit.

For a couple of companies that swear up and down that market leader Nintendo (and the Wii) are not their competition, both companies seem to go out of their way to crib wholesale from the big N’s bag of tricks.

Last year, it was Sony with their motion controlled Sixaxis controller — a last minute addition to the controller that was poorly implemented and to date has gone underutilized. That’s what happens when you don’t build the whole system and your new gameplay philosophy around the device, like Nintendo has done. Anything else seems half-assed.

Now, this year, Microsoft made the uncomfortable segue from the hardcore showcase (Gears of War 2, Resident Evil 5, Fallout 3) to a suite of titles aimed at courting the casual crowd. First up was Lips, their motion sensitive (uh-oh) karaoke title. Then came You’re in the Movies, which uses the Xbox Vision camera to place players in cheesy B-movie spoofs. In addition, they also offered up a second helping of Scene It. All of these titles are aimed at the casual crowd — a crowd that to date has largely shirked the more advance systems in favor of the pick-up-and-play experience offered by the Wii.

But the biggest stumble Microsoft made was the unveiling of their Avatars. Essentially, they’ve kidnapped the Miis and made them into little hipsters. Avatars are end user creations that can be extensively customized and will represent the user in the game space. When they roll out, they’ll be everywhere. On your desktop. In the game menus and lobbies. And some will follow you into the games.

Now, I’m a Wii60 household, meaning I’ve fully embraced the Miis and I dearly love my Xbox. Of course I’ll make one of these and update them as time goes on. This personalization is fun; I don’t deny that one bit.

But I think Microsoft is courting the casual crowd a little too much. They’ve already got a firm hold on the hardcore game base (a demo that is relatively large and doesn’t mind opening its coffers to buy lots and lots of games). I think the family demo will be forever out of their reach until the day they up and buy Nintendo. Nintendo is the Walt Disney of the game world and families know it. They feel safe with a Wii — realizing that Mario never carjacked Yoshi and the Princess never plied her peaches on the streets of Vice City. Nintendo will keep their hold on this generation simply because they designed a piece of entertainment tech that really grabbed the mainstream — something that neither Sony nor Microsoft could no longer do the more complicated their machines and controllers got.

And that should be fine. Different strokes. Everybody is making tons of cash, and unlike the 90′s, there’s plenty of room on the market for three consoles. I’m sure most 360 owners will embrace their Avatars, but I don’t see them being the bridge to the casual crowd for which they were obviously designed.

1. Microsoft really wants to beat Sony: At the close of their key note, Microsoft dropped the bomb on Sony. I’d seen rumors of potential Microsoft announcements for weeks. Some came true. Some remained in the ether. But this one seemed to surprise EVERYONE!

After leaving the stage near the end of the event, guest speaker and Square-Enix president Yoichi Wata re-emerged to tease one additional title: Final Fantasy XIII.

The former jewel in Sony’s crown. This was the one title on the radar screen that was stilled deemed a system seller for the PS3. With Metal Gear Solid 4 having come and gone, Final Fantasy XIII represented the next best hope for moving more units en mass. And since the original Playstation, which saw the Final Fantasy series elevated to blockbuster status with the release of VII, the series has been a Sony stalwart.

But the days of system exclusivity have waned. It just doesn’t make much sense for third parties from a pure profit perspective. Thus, Microsoft pulled off a major coup by luring Final Fantasy XIII to its system. THIS IS A SYSTEM SELLER and it doesn’t matter if it launches day and date with the PS3 version — it will move units much in the same way that the dual release of GTA4 moved systems for both parties.

Having just completed MGS4 on a PS3 on loan from a friend, the one title ahead that really had me debating how and whether to get a PS3 was Final Fantasy XIII. I’m just such a huge fan of the series and each installment (aside from the MMORPG-centric FFXI) has been a must play. Now, that thirst has been quenched.

I don’t think this move is a death knell for Sony. They’ve got quality first party titles in their stable and certainly, their own legion of fanboys. What this does do is bring the Era of Exclusivity closer to an end — which, in the long run, is good for gamers and for the industry.

As I mentioned above, I really think all three consoles can thrive. They’ve all got their fans and have carved their specific niches. These are the salad days for the games industry, and all three companies have found a bumper crop of cabbage to farm. Hey, gas prices are too high. Why not just stay home?

Anyway, all told, it was a great conference by Microsoft. That last announcement has me thrilled.