I feel like you’re underestimating the power of console brand loyalty, as well as how severely Microsoft fucked up with the announcement and launch of the Xbox One. (If anything is a powerful testament to the power of brand loyalty, for instance, it’s the never ending Nintendo apologia even during the low days of the WiiU.)
Deep brand loyalty has been ingrained into videogame culture since the days of the SNES and the Genesis. An entire generation of marketing was built on taking potshots across the road at the other company, trying to make them look bad while making yourself look cool. Things got a bit muddied when the aborted Nintendo+Sony deal resulted in Sony entering the console market on their own in earnest, but the folding of Sega and Nintendo’s refusal to stop doing their own thing (the graphical prowess of the Gamecube was kneecapped by their insistence on using weird proprietary discs based on mini-DVDs) meant that we eventually wound up once again with a heated two-horse race between Sony’s PlayStation 2 and Microsoft’s new Xbox. PS2 had the library advantage, but Xbox had superior hardware and much better online support, not to mention Halo.
The tension between the two only grew stronger in the following generation, where Sony fell into the same trap that Nintendo did (weird proprietary hardware in the form of the Cell Processor that wound up scaring developers away) and lost ground to the Xbox 360, with Nintendo not even pretending to compete on account of going for the grandma audience with the Wii. This left the core console market as a two-sided affair, which is the perfect recipe for an “us versus them” brand war. The Blu-Ray/HD-DVD format war also factored into a strengthening of the battle lines, as did the general perceived demographics of the consoles. The PS3 was the Japanese anime game device, whereas the Xbox 360 was the American multiplayer shooter platform. You either picked one or the other, and brand loyalty shitposting hit an all-time high, with arguments about consoles exploding or having no games on them.
As much as I love the PS3, there’s no denying that the Xbox 360 was the clear winner in the North American market. The only reasons the PS3 didn’t crash and burn with its disastrous price and lack of library were because it got Metal Gear Solid 4 and because the early Xbox 360s had a catastrophic overheat failure rate, which made the expensive PS3 a slightly more appealing option once word of the overheats got out. By the time Microsoft ironed out the hardware problems, the PS3 had finally gotten more games on it, but it still wasn’t enough to defeat the 360 in terms of sheer popularity. 360 was easier to develop for and had the killer app of Halo 3, and the rest is history.
The Kinect is partially to blame for Xbox’s downfall, but not just for existing. The Kinect circa Xbox 360 wasn’t a massive success, but neither was the PS3′s Move controller+EyeToy setup. It was a case of both companies experimenting with motion controls after the Wii struck gold, but doing it too little and too late. Where the problems hit was when Kinect was included as a mandatory part of the Xbox One. In theory this was a good idea for developers since they could count on the Kinect being part of every unit and thus develop for it more confidently, but this backfired due to the Kinect itself being unpopular with the Xbox’s core demographic and inflating the price of the Xbox One, making it $100 more expensive than it would be without. On its own, this would have been an awkward handicap, but not insurmountable. The biggest shot in the foot for Microsoft was that they paired it with absolutely anti-consumer policies.
When the Xbox One was announced, the plan was that it had to be always-online to work, and wouldn’t support used games. Always online is a tall order for some customers (especially those with data caps), and always online with a mandatory camera+microphone device is extra skeezy. The used-games lockout was also very anti-consumer, since it would also potentially prevent you from sharing games with your friends. The real kicker though was when consumers asked about an offline option for the Xbox One, they were told that Microsoft already had a product for people who couldn’t have a constant internet connection: The Xbox 360. They essentially told all their customers to fuck off and stick with the old hardware if they didn’t want to be constantly online. The fact that marketing focused more on TV apps, sports, and media box stuff instead of gaming only further seemed to tell the core gaming audience to piss off.
The sum of all this is that Microsoft was announcing a console that was more expensive than it needed to be to accommodate a peripheral that the core audience didn’t want, all the while seeming to actively antagonize the core gaming audience who would buy it in the first place. That’s enough to give people pause about where their loyalties lie.
The final nail in the coffin was Sony’s response to Microsoft’s tone-deaf announcement. Having been humbled down from their high-horse during the PS3 days and eager to regain ground, the PS4′s announcement was pretty much a direct “take that” at Microsoft. Their console was announced at a price $100 below the Xbox One with no mandatory motion bullshit, and their presentation on how to share games on the PS4 was a simple 3 second demonstration of physically passing the disc from one person to another. There was no used games lockout, no always online bullshit, and no wasting time on sports and TV to the detriment of games. Hardware wasn’t a limitation either, since both the PS4 and Xbox One were based on x86 PC architecture and had more or less comparable specs. Microsoft couldn’t even rely on Halo to move consoles because the IP got handed over to 343 Industries, who proceeded to shit on the lore and alienate Halo fans. It could also be argued that the popularity of multiplayer shooters had given way to what we now know as the Soulsborne genre, and PS4 had Bloodborne as its killer app for added incentive.
As one might expect, the combined effect of Microsoft pushing their audience away and Sony eagerly pulling them in resulted in many people flipping to PS4, leaving Xbox One in the dust. While Microsoft eventually realized the error of their ways and tried to reverse course by axing the Kinect and disabling always-online via a patch (ironic considering you need internet to download a patch in the first place), the damage had already been done and they lost loads of market share.
To add insult to injury, Microsoft since then seems to have been intent on digging their grave even further. While Halo has lost the draw it used to have, Microsoft still had some tantalizing exclusives up its sleeve, such as the Remake and Remaster of the cult hit Phantom Dust, Crackdown 3, Cuphead, and the Platinum-developed Scalebound. Microsoft evidently decided this gave them too much of a chance to recover, so they cancelled the Phantom Dust Remake after sabotaging it with changing goalposts (reports say they cancelled it BEFORE announcing it publicly, which is extra baffling), released the Remaster for free on Windows 10 (probably to get people to upgrade to Windows 10, which was facing its own consumer crisis), released Cuphead on Steam instead of as an Xbox exclusive after a long status of being MIA and presumed cancelled, left Crackdown 3 also MIA, and most terrible of all cancelled Scalebound and ended their partnership with Platinum only to later announce it was un-cancelled and being developed internally by what we can only assume is a much less capable mercenary crew of devs frankensteining together the existing assets into some kind of shambling mess.
The Xbox One’s downfall isn’t just consumers being fickle, impatient, or impossible to please. This is quite possibly an example of full on corporate suicide, where a company completely out of touch with what their core demographic wants proceeds to push that demographic away, and burn any possible bridges back for good measure.
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