Microsoft’s VP of strategy and business development for Microsoft's Interactive Entertainment Business Shane Kim has warned that the games industry will not be completely insulated from the effects of the global economic crisis.

Of his own business, Kim told Reuters that he was “cautiously optimistic” about Xbox sales, adding: “A big objective for us is to deliver most entertainment value for the dollar. Who knows, maybe flat performance will be considered a remarkable achievement.”

He also warned that many publishers might find it hard to cope with what remains an unpredictable future: “There are a number of mid-tier publishers behind the Electronic Arts and Ubisoft’s and Activision’s of the world who are struggling.”

However, there was good news in the belief that new content delivery systems such as Xbox Live are lessening the industry’s reliance on big-budget sequels and resurrecting the market for small, independently produced games:

“One of the challenges the industry has had, in my opinion, over the last five to ten years is a growing reliance on sequels and licensed properties as opposed to those new creative hits. If we can find those nuggets that start smaller and can grow into big hits, that’s a great thing.”