VG247 has a pretty good history of Xbox launch for those interested, appearing in installments.  Some choice comments that nicely summarize the why/when of MS deciding to get into the console business for those curious about that.

http://www.vg247.com/2011/08/02/the-xbox-story-part-1-the-birth-of-a-console/

http://www.vg247.com/2011/08/03/the-xbox-story-part-2-gunning-for-greenlight/

http://www.vg247.com/2011/08/04/the-xbox-story-part-3-going-public/

http://www.vg247.com/2011/08/05/the-xbox-story-part-4-launching-and-beyond/

My favourite little titbit is the following so far:

"The DX team had a clear understanding of what was happening in the console and PC games businesses at the time, and posited that it was better to lose PC gamers to a Microsoft console than to one made by Sony or Nintendo"

That right there sums up so much about MS initial direction with Xbox and the 360 and why the console initially was only really embraced in the US and the UK - IMHO anyway.

Well, it continues to only be really embraced there anyway.

You should also check G4 tv (you can find the video's on youtube) they have a lot of video's about consoles and their launch.

Best part about the Xbox launch was that one guy who wanted to ask his wife to marry him on the Xbox launch in New York and Bill Gates asking him 'What if she says no?'.

At one point I remember Bill saying, ‘If we don’t have something like Xbox in the marketplace, we don’t have a comprehensive consumer strategy. Either we do Xbox, or we sell the games division to Electronic Arts, we ditch MSN and we just focus on servers and Internet Explorer.’”

or that.... it is exactly what was and is the real issue here..... pretty much without XB MS would have become the IBM of software.... still going big but focus on professional or very specific markets..... and honnestly as much as people hate MS and windows.... a world without them would be a severe pain...

Well you can't really say that because according to those articles the ideaology for Xbox changed so much and so many times by the time it was greenlit it was totally different from what they first conceived. It's interesting to me that so many people were against it. I mean I could understand third parties being hesitant but the majority of their opposition was internal.

bookmarked

I don't believe that element of the ideaology changed much at all from the article (and other information).  Sure a lot of core stuff did change - Windows never became the OS for example - but the Xbox was heaviliy targeted at more of a PC type gamer than existing console gamer at that time.  Halo, the growth of online with Halo 2 and of course the 360 and Live were all a hit really with gamers who would otherwise have been drawn to PC.

Essentially, for a long time (until fairly recently arguably) MS success has rested with switching a generation of potential PC gamers in the US, the UK and to a lesser extent other English centric countries like Australia, to play online FPS/TPS games and graphically intensive games on a console platform instead of PC.

The Xbox (and the 360) core USP has been cheap PC gaming without the hastle and in your living room instead of some small office room.  If MS hadn't manged to draw in that demographic (and without Halo I doubt they ever would have) I doubt MS would still even be in the game.  Until Kinect (again mainly in the US/UK) MS really remained locked into that demographic with Nintendo taking the more family/casual audience from Sony with the Wii.

Very interesting read, I think the Xbox has taught Microsoft a great deal about its consumers.

Microsoft's biggest business was, and still is the Windows Operating System.  MS was more worried about the PC platform than PC gaming.  They saw the PS2 to be a threat if Sony used it as cheap computer or set top box as they claimed it could be used.  Sony did release Linux for PlayStation 2 but most their other plans for the PS2 didn't see fruition.

As for Nintendo it's true they weren't a threat to MS's PC business the same way Sony was.  Here an interesting excerpt from former MS exec:

"Peter Moore has revealed that when he left Sega to come on board with Microsoft, his earliest conversations with his new company were in regards to a “build or buy” strategy—whether to build out the existing Xbox business, or to outright buy Nintendo.

In an interview with the Guardian’s Games Blog, Moore described his initial discussions with Microsoft CEO Steve Ballmer. “He wanted to know how I was going to win for Microsoft, how we were going to take on Sony, how would we compete with – or acquire – Nintendo. Those were the conversations in those days. It was a classic build or buy conversation. Xbox had launched but it was an aggressive black box for shooters, and how do we evolve that, how do we build the next Xbox, how do we get after Sony?”

He added, “Interestingly, we were just completely fixated on Sony – Nintendo didn't even come into the conversation.”

That Microsoft has had the desire to purchase Nintendo has been a frequent rumor since the days of the original Xbox; in 2004, a report appeared on the website of financial publication Forbes that alleged Bill Gates had expressed interest in buying its competitor, if only former company president and major shareholder Hiroshi Yamauchi was willing to sell." - source

Just finished reading the last piece and I have to say I never knew bringing the Xbox to market was such a struggle. I'm sure everyone involved has to be really proud at how far they have come with the Xbox brand.