I saw David Cage's talk today at GDC where this was shown. He heavily emphasized that this is NOT from, and has nothing to do with, the game they're currently working on. (Sadly he didn't give any clues about what they *are* currently working on...) It's just an example of what their new engine can do.
He also said that the tech demo was made a year ago, with version 1 of their new engine. They're now on version 3, which presumably means that whatever they are working on will be farther advanced than the Kara short.
Even if it's totally self-contained, the demo is pretty impressive when you consider that the acting is more or less raw (this is what they captured from the live actor, not edited or animated). It also ran directly from a PS3 -- it's not a prerendered movie.
I remember how impressive the "Casting" demo was in 2006(?) or whenever it first appeared at E3. Funny how now, by comparison, it looks plastic and weird. This makes me excited for whatever Quantic Dream's next project will be... I hope they reveal some info soon.
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