Going into this generation it looked like Microsoft was at the top of their game, they released their Xbox 360 console a full year before anybody else, had lined up some amazing exclusives, and seemed to have the momentum when it came to their online community. But only two years into the console's life it feels like we're starting to hit a wall, things aren't looking nearly as good for Microsoft as they were a year ago and companies are starting to jump off the ship faster than rats on the Titanic.

While nobody can dispute the phenomenal sales of Halo 3 (which led to a sales increase on the Xbox 360 hardware), it's also clear that something bad is going on the land of Microsoft. Are we just looking at growing pains, or is this something far more troubling that we should all be concerned about?

The problems all started earlier this year when Peter Moore, the Corporate Vice-President of Microsoft, announced that he had accepted a job at EA Sports. Outside of the timing (which happened mere days after taking the stage at E3 to sell the game journalists on the future of the Xbox brand), nothing about this announcement seemed too unusual. After all, this is a fickle business where plenty of important players move from one company to the next. Little did we know that this one departure would be the beginning of a troubling trend for Microsoft.

Last week the gaming world was shocked to learn that Bungie, the makers who just came off of selling $300 million worth of Halo 3 discs, has decided to leave Microsoft to become an independent developer. While this doesn't mean that we're going to start seeing Halo games on the PlayStation 3 and Wii, it does come off as a major blow for Microsoft, the company that has been funding projects like Halo 1, 2 and 3. This kind of deal is virtually unheard of, so it's easy to see why so many people were taken aback by this news.

Unfortunately it's not just Bungie that finds itself moving away from Microsoft. Not even two weeks ago we learned that another company aligned with the Xbox 360 would headed to the land of multiplatform. This time around it's Bizarre Creations, the developers of one of Microsoft's flagship racing games, Project Gotham Racing. In an "ongoing attempt to enter new genres," Santa Monica-based publishing giant, Activision, has decided to pick up Bizarre Creations. This news could not have come at a worse time for Microsoft; Activision broke the news just hours before Project Gotham Racing 4 shipped to retailers across the country.

To make matters worse, all of these companies exiting the Microsoft fold come on the heels of the dismantling of FASA Studio. After months of speculation and rumors, Microsoft finally put FASA Studio out of its misery and moved most of its employees to other projects. Although they are best known for games like MechWarrior and Crimson Skies, FASA's final outing was the much maligned first-person shooter, Shadowrun. For months studio head Mitch Gitelman denied rumors that Microsoft was dissolving the studio, but it seemed clear that the writing was on the wall for FASA.

If this was just a story about Microsoft losing Peter Moore and shutting down FASA Studio then nobody would care, these two events seem inevitable in the grand scheme of the game industry. However, the fact that within weeks of those announcements we're also seeing the exit of both Bizarre Creations and Bungie makes me worry that maybe not all is right in the world of Microsoft. Do these companies know something we don't about the future of the Xbox 360? From the game player's perspective it's hard to argue with the 2008 line-up, especially if Microsoft is able to ship heavy hitters like Alan Wake, Halo Wars and Too Human.

Speaking of Too Human, Silicon Knights is another one of those companies giving Microsoft nothing but a headache. While it's true that Silicon Knights has never been a company exclusive to Microsoft (the game they are making after Too Human is reportedly for Sega), Microsoft is the one set to publish their most ambitious game yet. Or are they? Originally announced more than ten years ago, Too Human has been moved around from the PlayStation to the Nintendo 64 to the GameCube and now to the Xbox 360. And to make matters worse, the game doesn't feel any closer to being completed than it did five or six years ago.

The game's most notorious demonstration came at E3 2006, where journalists (and Best Buy employees that snuck in) from around the world universally agreed that Too Human was a little too unpolished. It's not that everybody was expecting a completed build of Too Human at the trade show, but with its terrible frame rate issues, disappointing graphics and game ending bugs, Silicon Knight's newest game didn't look ready for its winter 2006 release date. To make matters worse, company head Denis Dyack waged a war against the media over the E3 showing and certainly didn't win any favors with the game press (see: Somebody Else's Podcast Vol. 3). Sadly it came as no surprise to anybody that Too Human's release slipped from 2006 to sometime in 2007. But then, here we are at the end of 2007 and there's no sign of Too Human anywhere. Will the game actually make its 2008 release date? And even if it does ship next year, will the company's lawsuits overshadow the final product? No matter what the answer is, Silicon Knights is proving to be a major thorn in the side of Microsoft.

Looking over the list of the companies who are leaving or have already left, it feels like the only developer left in Microsoft's corner is Rare. Just a few years ago it seemed like Microsoft buying Rare was the coup of the century, especially when you take into account the company's amazing track record with Nintendo (which includes Donkey Kong Country, GoldenEye 007, Perfect Dark and Blast Corps). But so far Microsoft hasn't been able to shake loose the same amazing titles for their Xbox brand. Rare's first two games consisted of a disappointing action game (Grabbed by the Ghoulies) and a remake of Conker's Bad Fur Day. Unfortunately their Xbox 360 offerings haven't fared much better, to date all we've seen is the hideously short Kameo, the rushed Perfect Dark Zero, and Viva Pinata, a game that won over the critics but couldn't find an audience on Microsoft's platform.

Although Rare does have a few games in development for the Xbox 360 (including the long awaited third installment to Banjo Kazooie), one has to wonder if Microsoft won't find a way of spinning them out into some sort of independent developer. Rare is already working on Viva Pinata on the Nintendo DS, so it doesn't seem like that much of a stretch to see Microsoft try to make back some of their investment and sell the UK-based company.

But if somebody actually did buy Rare where would that leave Microsoft? Here is a company that seems to be losing all of its friends and destined to live its life alone. But maybe all this doom and gloom is unwarranted. Perhaps Microsoft is just doing what Sony has done for years now, partnering up with second party companies that they have no ownership of. Perhaps what we are seeing is the rebirth of a bigger and stronger Microsoft. Or maybe we had it right all along; maybe there's something wrong with the Xbox 360 and all the rats are fleeing the ship for a reason.