What Went Wrong with Microsofts Strategy for Xbox this Gen?

[Shadow1980]

The Xbox Series X|S was doomed from the outset because MS dropped the ball twelve years ago with the announcement of and build-up to the Xbox One. That system's troubles started with early rumors that it would be required to be always online in order to function, which led to concerns that were promptly dismissed by Adam Orth's infamous tweet where he said "Sorry, I don't get the drama around having an 'always on' console...Every device now is 'always on.' That's the world we live in. #dealwithit." Then there was the official announcement of the system, which was roundly mocked for its focus on its multimedia functionality rather than it being a game console.

Microsoft later confirmed the existence of system-wide DRM, including mandatory online check-ins every 24 hours and limits on used games. The backlash to this led to what I still consider the biggest mic drop moment of E3 2013:

While MS would later backpedal on this in the weeks following E3, the damage to Xbox's reputation had already been done. It also didn't help things that MS still insisted on bundling Kinect with the console, making it $100 more at launch than the PS4. Furthermore, Xbox was already struggling in the exclusive software market late in the 360's life cycle, as they had been mostly whittled down to Halo, Gears, & Forza for notable first-party titles and third parties were increasingly less likely to forgo releasing on the PS3. Between the damage to the brand's reputation and the fact that the PS4 was the better value proposition, the XBO struggled out of the gate. Even the release of Kinect-less SKUs and various price cuts couldn't make Xbox competitive with PlayStation anymore.

And that was the worst possible generation for that to happen. The increase in adoption of digital downloads meant that more and more people had their software library tied to their accounts and thus less likely to change brands again in the following generation. While the Xbox Series was in a vacuum in a much better position at launch than the Xbox One was, it still couldn't compete with the PS5. In an alternate reality where they didn't drop the ball with the Xbox One, then assuming the Series X|S were exactly the same in this alternate reality as they are now Xbox would still be in a strong position. Xbox may have even remained the #1 brand in North America. It might've been a bit closer given how Sony improved things on their side with the PS4, but we wouldn't be seeing Xbox sitting in a distant third on its home turf.

And no, I don't think MS's original plans for the XBO were somehow vindicated by history. There's a difference between people voluntarily relinquishing their property rights going all-digital and keeping their systems constantly connected to the internet and people being forced to do so.

As for the way things stand now, it's been increasingly clear that MS is positioning Xbox as a hybrid first-party/third-party entity, still offering their own hardware but with a focus on pushing their games on PS and/or Nintendo platforms rather than just Xbox & PC. That's even less incentive for anyone besides brand loyalists to consider buying an Xbox console (and I may even consider forgoing Xbox next generation if I can get all their games on PS6 or Switch 2/3), but given the hardware itself has never been profitable, it could be a viable strategy. MS is banking on making more money on maximizing their software sales, thinking that will make up for likely continued declines in Xbox hardware sales. Considering how they've spent considerable sums of cash buying out two large third-party publishers, they certainly have a big enough portfolio of IPs at their disposal to put on PlayStation, Switch, Xbox, and PC.