The video game console business is a three-party war, between Microsoft, Sony and Nintendo.

If you’re not winning the console war, it’s good to say that the war isn’t over yet.

In fact, it may not be over for years. That’s what Shane Kim, head of Microsoft Game Studios, told me yesterday at the company’s game showcase event in San Francisco. I sat down with Kim with a group of game journalists to discuss what it’s like in the trenches, with Nintendo at No. 1 and Microsoft and Sony battling it out for No. 2.

Q: How are you juggling the release schedules for the big titles coming for the Xbox 360?

A: We don’t want to release titles on top of each other. Especially similar titles. “Too Human” is coming out in the near future (August). We’re not worried about that running into other titles, knock on wood. The two big titles we have to keep apart are “Fable II” and “Gears of War 2.” You want them separated by a few weeks. Gears of War 2 is coming out in November. Peter Molyneux (developer of Fable II) knows that and has that in mind.

Q: You have a lot of big games. Are there any smaller titles that aren’t here?

A: The only two titles that we have announced but aren’t here are “Alan Wake” and “Halo Wars.” Those aren’t smaller titles. I’d rather not show you since, ultimately, you guys might be disappointed. And you guys would write that. It’s software.

Q: Is Alan Wake scheduled for 2008?

A: We haven’t announced a firm date for Alan Wake or Halo Wars. The stock answer is that they will ship when they are ready.

Q: Are you going to acquire some third-party titles as exclusives, like last year’s BioShock?

A: I wouldn’t say we acquired those. The publishers chose to make them exclusive on the Xbox 360.

Those deals aren’t always business arrangements. It can be very expensive to make a third party title exclusive to one platform when it could be on three or four platforms. You just don’t see it very often. It’s more likely you see things like our exclusive on downloadable content for “Grand Theft Auto IV.” That’s different from the game being exclusive.

Q: Where would you say we are in the console war?

A: Too early to call. Some say Nintendo will win the generation. Really? We’re only in our third year with the Xbox 360. You can’t deny Nintendo their success and their momentum. But I think the generation will go on for quite some time. There is a lot of competing to be done.

Q: What will determine how the war turns out?

A: The winner will have closer to 100 million unit consoles sold, not just 25 million (where Nintendo is now). We still have a long way to go before anyone hits the stratosphere. Our challenge is to get to a mass market. It’s not just about the consoles sold. It is also about the share of consumers’ wallets too. People by far are spending more on hardware, games and accessories for the Xbox 360. It’s a significant lead. We have a healthy ecosystem.

Q: How do you determine how much to spend on games, studios, whether to acquire developers?

A: We’re trying to run a profitable business and at the same time execute on our mission as a first party of showcasing the platform. They go