The moment Xbox died

And the most extensive obituary in modern tech

Multiple shots were heard the morning of June 10th, 2013, inside the Los Angeles Memorial Sports Arena. Sony dared to commit the same crime that killed the SEGA Dreamcast in 1995 almost two decades later, but this time against a bigger juggernaut called Microsoft.

“It’s over, again”.

But, we’re going ahead of ourselves.

“This is Football Heritage”

In March 16th, 2018, following Manchester United’s Champions League elimination by Sevilla, the head coach, José Mourinho, gave a passionate 12-minute press conference about their exit from the maximum European competition.

He introduced the concept of “Football Heritage”. The cumulative list of decisions that not only made him the next head coach of a big team, but also having to deal with the baggage of all bad decisions committed before his tenure with the hope of a successful rebuilding, at the same time he drove the team into competing for silverware. However, time would prove that none of these would come to fruition, regardless of the head coach or the players.

Manchester United was the biggest football club in Europe, with a giant wallet and world-class squad. Its fallout can be pointed to the departure of the head coach Sir Alex Ferguson, after which the club gave in to short-term success and profits, instead of reinvesting into a cohesive plan. Today, a shadow of its former self, Manchester United is known as a clown club were careers come to be destroyed.

“We lost the worst generation to lose”. That sounds like Videogame Heritage.

This is similar to what has happened to Microsoft and Xbox in recent years. We can draw a line were the baggage set in, when everything came down. No matter what executive came in and what strategies were put in place, Xbox never have recovered.

That moment was that infamous E3 2013 presentation. Almost ten years after, the CEO of Xbox, Phil Spencer, explained why the division stuck in a desfavorable position in the market:

“We lost the worst generation to lose”.

That sounds like Videogame Heritage.

What Phil said what not an euphemism or an exaggeration, but a description of the lowest point in Xbox history. Even today, the ripples still shake their headquarters, and every decision from there onward can be backtracked to that moment, when they lost the war at the E3 2013.

That point in gaming history was pivotal, but it felt more on the press and social media than financially. Similar to how Napoleon lost the Battle of Waterloo, which marked the end of its rule, the E3 2013 shifted the whole Modern Console War™ to PlayStation — yes, Sony ended a console war twice in a row, with just three digits.

The greed and shortsightedness of Don Mattrick, Xbox CEO at that time, made staying in the console business a battle uphill against PlayStation and Nintendo, at least to this day. By giving Don the keys of Xbox, Microsoft also gave too much confidence to the guy responsable of bringing the Kinect to market, which was more of a response to the Wii rather than something to push Xbox forward. Like the Xbox One, it was an accessory to broad the appeal of the console.

Even if Phil Spencer looks as the bad guy the media likes to naively picture when something goes wrong on Xbox, like studio closures, key departures or prices hikes, and nobody who identifies as a smart person should — even when they hide by delivering the bad news through someone else. Even if he is the face of Xbox, the wallet is still owned by Microsoft, and it’s easy to blame the boss when nobody sees that most decisions come from the financing arms of Microsoft itself, and its shareholders and investors pressuring to “keep the line going up” whatever it takes. That’s their job.

Their major franchises, once exclusives to their own platform, now prostitute to whatever store lowers its window at the side of the road.

Xbox doesn’t have a problem with becoming the next SEGA. They already are. The difference is that SEGA quit the market almost instantly, while Xbox has not done that for more than ten years. They’re stuck in the sunk cost fallacy. The may see more profits making Xbox a service, as killing a brand or hardware division would send bad messages to shareholders.

I wonder how old Sony fans must feel to see the business vanquished two console makers and transform both of them into publishers, nonetheless.

Their problem is keeping face while abandoning the consumers who still believe to this day that Xbox, as a hardware platform, is relevant. Not only their last two console platforms has been a failure, remarked ad nauseam by the media outlets, but the market have not helped either:

• The mobile gaming market grew 4 times in that year alone, and before AKB acquisition they had zero presence on mobile.
• Console hardware hasn’t jumped into the new generation of players, who reportedly don’t spend in buying games (and by that, consoles).
• Valve’s Steam Deck has successfully pushed Linux as a viable gaming platform, instead of Windows.
• The auge of Mini PC and PC-handleds which offer more features than the Xbox Series consoles, while being comparable cheaper or more convenient.
• Windows 11 problems cascades into players, being less reliant on Xbox for PC.
• Tariffs and “market conditions” has skyrocketed the price of consoles and gaming PC hardware, and more recently Xbox Game Pass, worsening the already bad value of an Xbox console.
• Their latest try on the console market, the Xbox Ally X, is a $1,000 device that cannot play Grand Theft Auto VI — I’m eager to see the media spin around this in 2026.

Xbox, and by that account Microsoft, disastrous handling of the gaming brand is something that books should be written about. It’s the sort of what happens when the suits start to run the show on panic, following trends instead of following the very people that want to release products and services they themselves want to play and use, much like Steve Jobs predicted ages ago.

Their major franchises, once exclusives to their own platform, now prostitute to whatever store lowers its window at the side of the road. None of their games can sell a console, like Gears of War and Halo did at their peak. None of their consoles have a “killer feature”, opting for the safeness of homogeneity. None of their marketing has a consistent message, like the Xbox 360 era did. They have never produced a Game of the Year, the people that make decisions don’t know the passion that drives game development and never will — ask Tango Gameworks what happened after they released Hi-Fi Rush.

Xbox Media Briefing was a disaster on product management. They didn’t address their anti-consumer mechanisms, but doubled down on stage.

To understand why this is happening, we need to travel back in time to a massive media event renown world-wide for concentrating most of the gaming content and news, but also were juggernauts took stage to convince the gaming community why they were the best platform to play games: the Electronic Entertainment Expo.

You know, the E3 2013.

One flawed reveal

There was a lot of expectations for the next-gen consoles to replace the Xbox 360 and PlayStation 3. Nintendo’s Wii U release months prior was a huge failure at that time by many factors, giving Microsoft and Sony the spotlight, respectively.

Microsoft was notoriously ahead. The Xbox 360 dominated the market, mostly due to PlayStation 3 failing to transform their dominance of the prior generation into a product that promised too much and delivered too little, too late. This will be a recurring pattern.

Never seen a dad make a line for the release of a new set-top-box, but Don Mattrick somehow in its infinite idiocy believed that stupidity.

Some weeks before the E3, to be held at early June of 2013, Microsoft decided to invite the press to a reveal event that would present their media strategy around their next gaming device, the Xbox One. They did this surrounded by rumors of the next-gen consoles being devices tied to the Internet and a single, digital and nontransferable ownership, something that sprawl negative reactions everywhere.

That Xbox One presentation was tone deaf to the bone.

Expectations rapidly turned into frustration. It was presented as a television accessory, as it was. It only put a cover of uncertainty for their scheduled E3 show, event that would be focused on “the games” like it was an add-on much like the Mega Drive 32X. That may be some kind of foreshadowing.

There was a method to this madness, though. “The line had to go up”, and what’s best than expanding the product reach and the target market. They clearly didn’t know what the core audience was. Gamers expected a gaming machine that would double as a decent media center, not a sports-tv-device that would double as a gaming machine. Never seen a dad make a line for the release of a new set-top-box, but Don Mattrick somehow in its infinite idiocy believed that stupidity.

On top of that, there was no clarification over the anti-consumer practices, something the media made rounds about every day. Instead, much to the fear of the consumers, these practices were confirmed with a shy article expecting nobody would notice. That also confirmed that Xbox leadership lived in a bubble, and proof of that was the hours next to its publishing. That article spread through the media like wildfire.

Gamers were clearly disappointed with the direction Xbox was taking. For those with an Xbox 360, it felt like betrayal.

Moments before the E3 2013 presentation, Don Mattrick would be smartly cornered by Geoff Keighley, who sniffed blood on the ground. The executive answered with something that would anger any consumer of any product on any planet called Earth.

Some late-stage streamers would reference this message with phrases like “If you’re a broke boy, just say so”.

2013: Sony wins the Modern Console War

Xbox Media Briefing was a disaster on product management. They didn’t address their anti-consumer mechanisms, but doubled down on stage in front of the press and the core audience which, in gaming, tends to be both at the same time. Every feature was looked with negative optics, from the always-spying Kinect to the online features made to appeal their partners.

Those Xbox One missteps would have been all but anecdotes if the price was cheap enough to be ground breaking, but it wasn’t. You see, Microsoft executives have large enough paychecks to know what is the real meaning of “cheap”.

The Xbox One costed a whooping $499.

That price didn’t resonate with anyone. Without Halo and Gears of War at launch, or even a “Wii Sports” from Microsoft, there was nothing to push system sales either. Gamers were clearly disappointed with the direction Xbox was taking. For those with an Xbox 360, it felt like betrayal.

Sony, on the other part, took a page from Napoleon by “never interrupting your enemy when he is making a mistake” — or several from the gamer’s point of view. Their execution was exemplary.

In their media briefing, the audience attention was on how the console would behave, more than the catalog or features, which is kind of baffling when the common belief is to value the platform by its games and not the other way around.

In stage, Jack Tretton, CEO of SCEA at that time, promised no game-sharing restrictions, no ownership restrictions, and no always-online requirements, each of these announcements followed by cheers and applause.

Finally, the moment that Xbox really died as a hardware platform came. Andrew House took the stage and announced the price of the PlayStation 4, to be sold at $399.

That was the moment.

That price meant that for the cost of the Xbox One, a consumer could get a PlayStation 4 and an additional game or two, may be an accessory or some months of PlayStation Plus. That $100 difference was massive.

A mixture of relief and ecstasy invaded the audience.

In one part, it was like a celebration to see a corporation beaten for being greed and tone deaf. Their announcements left them open for a response from Sony, which buried their hopes of starting the next console generation with the right foot — at that moment, it felt they wouldn’t start at all.

On the other part, the message made gamers felt they were genuinely heard, and people had something to look forward to. Someone important at Sony really gave a damn about the platform, knew who were the buyers, and what they were selling, and most importantly, how to expand the business from there.

A positive sentiment rapidly shifted towards Sony, and effectively made PlayStation the only platform that would welcome players. Even the PlayStation Plus subscription service was took as a fair trade to evade the Xbox platform altogether. For some, that felt like tribute. For others, a middle finger to Xbox Gold — or “Xbox Gone” as some of my friends would say after they made the switch.

Nor the Xbox 360 or PlayStation 3 chained their gamers with nontransferable online libraries, those where devices focused on physical media created at the time people still recorded shows in a VCR. Even if they wanted, the Xbox One did not play Xbox 360 games. This was the last time the slate was clean for a gamer to switch platforms, and people did in droves.

In the course of a day, Xbox became the platform for losers. The “you got the wrong one to play COD” platform.

Xbox became the Nickelback of videogames.

2014: The aftermath

The months that followed were chaotic for Xbox. Don Mattrick was fired the next month, and Phil Spencer was appointed to fix everything, which he did given how the division fared out outside the E3 2013. I can only imagine how frustrating was for everyone involved to build a product across the span of years only to see the leadership sink the ship in the course of just weeks.

Few days later, they backpedaled on some of their anti-consumer practices, notoriously their always-online requirement, but the damage was already done in the media, and that’s hard to control and costly to turn around.

Sales figures after the holidays were not that disastrous for Xbox, but were worrying for Microsoft expectations. For example, they alienated their Japanese market completely, and with that collaboration with any Japanese studio. If it wasn’t for the cryptocurrency-rush, PC would have cannibalized Xbox as the second best platform to play games.

Worse than the numbers, were the publishers. After a year it was clear that the biggest platform was PlayStation 4, so Xbox One didn’t get enough attention from developers, lowering the reasons on why people should buy an Xbox One in the first place. There was no chicken, and no egg. Its only saving grace was the easier port development since both Xbox One and PlayStation 4 shared the same underlying CPU and GPU architecture — In layman terms, is like saying both restaurants had an Italian chef, but one has less clients than the other.

Microsoft didn’t have any Xbox strategy for PC, cloud, or even mobile, so there was no Plan B for the business except to make the Xbox One “less bad than before” by placing it at $399 without Kinect, something that would have worked better if the didn’t do it six months after release. Another late feature, Xbox 360 compatibility, was brought two years after release. Those were things that should have been enabled at launch!

Xbox exclusive titles received mediocre reception, like Halo 5: Guardians, Quantum Break, and Gears of War 4. These were good games, but not good enough to be system sellers. As some Brazilians told me on why they didn’t cover Xbox One games, “why someone should buy an Xbox One if you can’t even pirate games on it”. In other words, nobody was even willing to “jailbreak” the Xbox One to run homebrew software, or even make bombs. There was no point in buying the console even aside from its intended use.

In 2022, the numbers showed the bigger picture. For every Xbox One sold, there was two PlayStation 4 in the wild. It was clear during that generation of consoles that there was no hope for enticing gamers to switch sides and forget the digital library they were building title-by-title in the competing platform. It was humiliating.

From selling Xbox to buying AKB

The Xbox division was against the wall. With dangling numbers to back up Microsoft expectations of revenue, rumors of Microsoft selling the gaming division to the highest bidder started to make rounds in the media.

From a business perspective, if a division was dead last on profits, it would be sold or just killed, freeing the investment for other more profitable ventures. The problem was the price nobody would have been willing to pay, and selling a division by parts is only done when you need the money desperately to raise the stock price, before the shareholders appoint someone else.

Instead, they pivoted Xbox to a service instead of a platform, and with that, the idea of having more presence on the gaming industry by buying multiple studios: Mojang, Obsidian, Ninja Theory, Double Fine, Zenimax Media, you name them. If the console was dead, then the games would live through it and recoup the investment through content.

Game Pass was born in 2017. The initial catalog was enticing, but nothing to write home about. Their killer proposition: $1 for the first month, $10 afterwards.

Imagine Phil being forced to shake the corpse of Xbox with fresh makeup at the same time Satya steals one or two rings from its cold hands.

Eventually, shifting their strategy to depend less on a hardware platform and more on the content itself, proved profitable. The Activision-Blizzard-King acquisition was a clear intention not to compete, but to dictate the competition. Call of Duty, Overwatch and Candy Crush made billions in revenue, so the investment would pay itself over time.

As of today, Xbox has been slowly becoming Game Pass itself, something Satya Nadella, current Microsoft CEO, would be happy about since he likes services above all — Microsoft makes most of their money that way. Today they’re capitalizing the user base with prices hikes and ad-supported tiers, expensive consoles and what else.

Microsoft doesn’t want remove Xbox from their portfolio, because that will hurt their shares. It’s just that Xbox as a hardware platform is dead. Imagine Phil being forced to shake the corpse of Xbox with fresh makeup at the same time Satya steals one or two rings from its cold hands.

Let me be emphatic: Game Pass is the new Xbox.

The rendition will be signed inside the Compiègne Wagon once Game Pass comes to PlayStation. Search your feelings, you know it to be true.