“Moving ahead, Microsoft will continue to invest in Windows as a first-class gaming platform through great Windows out of box experiences, our online gaming services including Games for Windows – Live, MSN Games and Messenger games, and through new games for Windows developed by Microsoft Games Studios.”

Those words, issued by Microsoft in the wake of significant changes to its PC gaming business, are becoming increasingly difficult to accept. More than ever, it’s apparent that Microsoft’s support of PC gaming is declining fast.

Since 2006, the software giant has dissolved no less than five internal studios that had a PC gaming focus: Aces (Flight Sim), Ensemble (Age of Empires), Digital Anvil (Freelancer), Hired Gun (Halo 2 PC) and FASA Interactive (Mechwarrior, Shadowrun).

Meanwhile, the few remaining Microsoft Game Studios are now decidedly focused on Xbox 360 development. Strange that the company that has the PC OS market cornered doesn’t appear to have found a synergy with PC game development. Microsoft didn’t even mention PC gaming during its recent Consumer Electronics Show presentation, where Windows 7 took the spotlight; Xbox 360 on the other hand enjoyed a nice chunk of attention.

The company insists that “new games for Windows [will be] developed by Microsoft Games Studios.” The question is, which Microsoft Game Studios will continue to develop PC games? Lionhead, which hit it big with the Xbox 360 exclusive Fable II? Turn 10, the Forza developer that has yet to release a game for PC? Rare, whose latest game was Banjo-Kazooie for Xbox 360?

It’s easy to criticize Microsoft in its approach to PC games, but can we really blame the company for tempering support for the platform? If you take a snapshot of the current business, Microsoft is right to make these changes. The firm was upfront with media about its reasoning behind Ensemble’s closure, saying shuttering the studio would help "keep MGS on its growth path" and that the decision was purely fiscal. One can assume that, particularly with the current state of the economy, the reasoning behind the recent Aces axing was along the same lines; it was probably an easy decision to make if only taking the bottom line into consideration. Why negate the successes of the console business when you can close down a few PC studios and Joe Halo—the real money-spender—wouldn’t know the difference?

The fact that Microsoft placed Ensemble, a studio infused with deep PC gaming know-how, on a console project based on the company’s biggest console IP is a great analogy for the direction that Microsoft wants to take its gaming business (i.e. away from PC). Halo Wars for Xbox 360 was Ensemble's curtain call.

Furthermore, it was Xbox 360 hardware and software—not PC game software—that drove revenues in Microsoft’s Entertainment and Devices Division to $3.18 billion in the company’s most recent fiscal quarter.

The truth is that PC gaming, particularly in the U.S., is suffering at retail; sales were down 14 percent year-on-year in 2008 to $701 million, according to NPD Group. It’s common for the PC counterpart of a multi-million-selling console game to sell just a couple hundred thousand copies. A PC strategy game might sell 100K. A flight sim could sell half of that in a year. And those genres are where Microsoft's flagship PC titles have resided.

It’s hard to build a strong business around those numbers, and surely when execs examined those figures next to Xbox 360’s stats, it was all too clear which platform would be receiving more investment and attention: Either invest millions in a PC game that will sell a few hundred thousand, or a console game that will sell a few million. Not a tough choice.

Obviously, there are subscription and digital distribution sales that cannot be ignored; a lot of PC gamers buy their games exclusively from services like Steam or Direct2Drive. By the same token, though, just because digital sales are growing, does it make it acceptable that the average retail consumer is spending less money at the counter? It’s possible that digital revenues are only cannibalizing retail revenues, and no true overall growth is taking place; that would be called stagnation. Hard telling where PC sales truly stand, as game companies like to keep digital sales figures under a mysterious veil.

Brush off NPD retail figures if you wish, but we have an inkling that Microsoft and other game makers aren’t jumping for joy when they see declines at brick-and-mortar outlets. The importance that Microsoft had placed on PC retail is absolutely apparent with the Games for Windows retail initiative, announced in 2006, that would make PC game packaging more pleasantly uniform on shelves. Make no mistake: PC developers still care about retail.

For dedicated, more agile PC game developers like Stardock or CDProjekt that deliver top-tier games at a relatively low budget, selling a few hundred thousand units is perfectly acceptable, and they can actually turn a profit with that volume (all the better for them if they break 1 million). Companies like Valve find PC success with not only reasonably accessible, quality shooters that everyone buys, but also the 15-million-account-strong Steam platform. And Blizzard has the cogs of the World of Warcraft machine churning out ludicrous amounts of revenue, not to mention some of the most desirable IP in gaming. These companies and others like them that are on the cutting edge of new business models and user-centric, service experiences--in concert with forward-thinking indies with a knack for design--will be the ones that grow the PC gaming market.

Microsoft’s PC gaming business, on the other hand, has lacked the agility, the mature digital distribution platform, and the reliable subscription sales that support the truly successful PC game developers.

It’s not that Microsoft won’t ink strategic publishing deals with outside parties to continue owned franchises such as Age of Empires and Flight Sim, or that we’ll never see a PC game come out of Microsoft ever again, or that browser-based gaming won’t hold a greater emphasis. But shifting development to outside sources, deleting certain internal development efforts and transferring resources to console development can in no way be viewed as a vote of confidence in PC gaming.