I believe Microsoft biggest issue was the S model being a weaker console. Historically, those haven't ever succeeded much.
Should have just done a disc less version or one with less memory.
PS2, Wii, Switch come to mind.
In fact, no console who was the strongest on the market ever won a console generation before the PS4, totally negating his argument:
2nd Gen Atari 2600 won, Atari 5200, Colecovision and the Intellivison were more powerful
3rd Gen: NES won, Master System and PC Engine were more powerful
4th Gen: SNES won, NEo-Geo and SupergraphX were more powerful
5th Gen: PSOne won, N64 was more powerful
6th Gen: PS2 won, Xbox and Gamecube were more powerful
7th gen: Wii won, PS3 and Xbox 360 were more powerful
8th gen: PS4 won, and was also the most powerful unless you want to count the One X