Okay, it's hard to rag on MSFT with regards to online console gaming decisions given that Xbox Live is kicking ass, but i loved this quotation from an article on Sony's new Second Life-like Home:
Microsoft considered doing a virtual world a few years ago. A source familiar with the matter said Microsoft decided not to because it didn't want to pull players out of the games they were playing. Microsoft partners, the game publishers, might have been angered if the virtual world was so interesting players stopped playing games altogether.
Virtual channel conflict?