MS had plenty of reasons to want to get into games market (and by extension similar markets with Zune).
While tightly linked with business usage for OS/apps they also saw consoles/electronic devices taking over personal use and the beginning of device convergence. They saw growing games industry linked with consoles and transition of PC to device focused around MMO/Online gaming. They saw Apple revitalised and taking market by storm with Ipod. They saw Google (and others) starting to undermine its OS/apps position.
Their worry, slowing being squeezed out of a market that changes to internet/content centric home devices and portable access to work/content with the importance of a heavy OS and Office Apps severly diminished, with consoles/media centres dominant in the living room and controlling access to online content/services. They saw their work to have DirectX become dominant over OpenGL threatended by home consoles and of the fact (so I believe) they didn't tend to use MS code/standards such as DirectX.
The Xbox was their first attempt to push into the home and gain a foothold in that market. The 360 continues this and of course is part of their entertainment division with Zune, etc. which is attempting to fight on this fairly broad front.
MS faces some serious challenges right now. Overall they are the new kid/smaller brand right now. If you compare their total games sales/success with say Sony & Nintendo they still have a long way to go to get near either of those companies highs. They also trail Apple for music players, etc. I mean 360 has done okay - but given its time to market its not really sold that much to shout about vs the bar set by previous consoles. And while brand loyalty can be broken, and many are not brand loyal, plenty of people still are, and I have no doubt that from a WW perspective MS still trail Sony and Nintendo as a brand for games consoles, just as they trail Apple as a Brand for Music players.
I'd also say 360 is not so much beating PS3 as Sony simply mismanaged PS3 launch and adoption. If you look at the initial sales spike in Europe for example, you can see demand for PS3 was way above anything MS could hope for currently. If Sony had actually made sure they had a stream of games/features ready to follow I have no doubt PS3 would have sold far above current levels - instead of course sales crashed when nothing in the way of games came through apart from a stream of poor PC/360 ports.
Now they have Google quietly attacking their desktop superiority and adoption/brand image of Macs steadily gaining ground vs PCs.
So MS has plenty of reasons to be in this market - but its paying through the nose for the privilege; and with so much paid for exclusive DLC, big price cuts, etc. I'd love to see some clear accounting for 360 sales/profits, as I'm very curious how the console's really performing, something which I feel is far from clear (particularly as I work for a very large company and I know how easily our accountants/marketing can spin sales/adoption to suit themselves depending upon how they chose to allocate costs and recognize revenue).
Try to be reasonable... its easier than you think...
