I agree with the OP.
And I'm still amused when I see someone starts to discover what MS really is.
Well, I'm not surprised, because unless you're affected by MS (which is always in a bad way when it happens), why would you look for information on this company?
No need to wonder why MS entered the console biz. It's pretty clear.
Basically MS succeeded a disruption (with BG cheating and screwing his own friends, blatantly stealing from others) at the IBM mainframe time, and since then, never got anything right anymore (except dirty business tactics), they never ever invented anything anymore, they just blatantly steal the work of other companies and put them out of business, and sometimes just buy them.
So now, they've maintained the status quo through several dirty ways (like buying the law, which is most sad for the countries in which it happened) but the nature's forces are such that even if you make dirty alliances, they'll finally fall with you, as you will fall if you can't innovate.
So they're attacked on all fronts, and they're losing badly since years.
So they feel threatened by several disruptors, and Sony was one of those threatening their only cash cow, the one that originated on their one and only disruption : Windows and the services around it. Sony was talking about a computer in every living room: what a mistake to do when MS is a competitor. MS felt threatened, and had to react.
They know they are a poor hardware company, and that's why at first, they decided to partner with Sega on their console. That's the day I knew Sega was dead. No MS partner ever comes out well from such a deal. They pretty much all are destroyed (or at least their product, which means the end for small companies with only one product). Hey, the latest I predicted was HD-DVD. As soon as I knew HD-DVD was MS' last hope to sneak in their poor codec as the main one for everyone, I knew HD-DVD was dead. To this day, I'm still wondering how come noone of these companies see what MS always does, it's as if they don't want to see what happens. But the game industry is starting to make me understand why this happens.
BTW, XBL actually started as the software for the Sega console, when MS partnered with Sega. So like always, they stole what Sega made with them, and Sega died. And like always, "people" all forgot about where the technology originated from. And then we have thread like these where all the praise is attributed to MS for something they actually didn't invented. But that's not a first. A lot of people believe that MS invented lots of things in their OS, when nearly everything was actually stolen from elsewhere or bought (and the inventor destroyed).
And they didn't lose $4 B, but actually $6.5 B in the XBox brand.
I was also rather amused to read someone on this thread, for whom what gave value to his XBox purchase was that he could install XBMC, which is actually Free Software (or at least Open Source, but it's based on Free Software). So basically, XBox had value by the addition of something made by people that MS hate, that they see as their greatest enemy: Free Software. That was hilarious.
Another example, is someone was saying that Halo was intended for the PC! WRONG! Halo was a Mac product before MS bought them so that they wouldn't make the game for Mac.
MS is an amazing company really, they even copy dirty business tactics, like what they copied from the old IBM (IBM changed since then): vaporware, astroturfing, and shills.
So I'm not surprised of the outcome for the XBox brand, really. Like I wasn't surprised about the Tablet PC, the Zune, Game for Windows, ...
Gamers are a special case though, and fortunately. Because gamers helped make Windows the success it is. At least, the Windows for desktop, as the others are failures too.
But gamers are special, they can't let them down. They push the hardware, though now they can't push it enough anymore. So MS has a problem with Vista. But the console was the salvation. Consoles are less prone to piracy, but the problem MS had, was that with Sega dead, there was not a single console that used MS proprietary technology, Direct X. That would have made no sense, when free standards existed (like OpenGL, that MS nearly succeeded in killing, but once again, salvation came from Free Software), and when Free Software libraries existed too.
So XBox brand is far more to MS than most people think it is. That's why they have to support it, even if they lose lots and lots of money. That's why Harvard's Christensen (who wrote universally and critically acclaimed economy masterpiece books like "The Innovator's Dilemna" or "The Blue Ocean Strategy") himself doesn't understand the business MS has with the XBox brand, which in his understanding is bound to fail, as it can't be sustained.
MS has become a company whose move you can perfectly predict, as long as you observed them long enough, have some basic economy sense, and have some knowledge of the field they try to enter.
