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Leynos said:
SanAndreasX said:

In the case of Sega and Microsoft, I'd actually argue that, rather than a third console stumble, they actually had second console lucky flukes, and their third consoles were more reflective of their overall performance. The Genesis was definitely the outlier for Sega console sales. Only the Genesis made it past 10 million units sold. The 360 was, to a lesser degree, an outlier in sales for the Xbox line. In both cases, a lot of the reason for their success was because they were able to exploit blind spots in the positions of the market leaders. The Genesis had momentum going by the time the SNES launched a year later, and it didn't help that Nintendo messed up on the biggest third party game of 1993 (Mortal Kombat). The 360 likewise beat the PS3 to market by a year and took advantage of the relatively weak PS3 launch. In both cases, the momentum eventually swung back to the market leaders by the end of the generation thanks to the market leaders bringing out a lot of big guns (DKC, FF6, Super Metroid, The Last of Us) while the Genesis and 360 were fading away.

I'd add 360 and Genesis killed their momentum shifting gears to focus on add-on peripherals. SEGA CD/32X for SEGA and Kinect for Xbox. So, both focus less on the core audience and games for these add-ons, which fewer people owned.

Yep. 32X becoming an industry punchline and infighting between Tom Kalinksy and his bosses in Japan over their refusal to listen to him on what worked helped doom the Saturn. It didn’t help that the Saturn was geared towards Japanese arcade-goers at a time when the market was shifting away from arcades. The Sega CD did at least give us cool games like Lunar and Vay. I have Vay on Steam, and I’m excited about Lunar Remastered. 

The 360 got a huge boost from Kinect, and Microsoft decided to go all in on it with the X1. The X1 was designed around Kinect. Once people rejected the concept of a Kinect-based console, it’s like Microsoft didn’t know what to do after their silver bullet missed. 

In both cases, they completely misread the market and mistook lucky flukes for long term success.