The Xbox Disaster Microsoft Never Recovered From (Video)

Microsoft spent a decade building Xbox into the console everyone's friends owned, then burned it down in about an hour. On May 21, 2013, Don Mattrick walked onto a stage in a white tent on Microsoft's Redmond campus and spent the first 30 minutes of the Xbox One reveal talking about TV. When a reporter asked what people without reliable internet were supposed to do with a console that phoned home every 24 hours, he told them to buy an Xbox 360. Xbox still hasn't recovered, and I think the reason has less to do with that stage than with what players were doing at home.

It helps to remember how far ahead Xbox was. The 360 launched in 2005, a full year before the PlayStation 3 and $200 cheaper. Gamerscore turned your play history into something you could show off, and Xbox Live gave you one identity and one friends list that worked in every game (compare that to Nintendo friend codes). Halo 3 pulled in $170 million in a single day, and by 2010 Microsoft had sold 80 million consoles. Even the red ring of death worked in Xbox's favor, because Microsoft spent $1.15 billion replacing broken consoles without arguing with anyone.

Then came the Xbox One. Mattrick, a former EA executive, wanted the console to be the command center for the living room, and three decisions sank it: a mandatory online check-in every 24 hours, a Kinect bundled into the price whether you wanted it or not, and DRM that tied every physical game to one account. GameStop stock dropped 13% overnight. Sony's answer at E3 a few weeks later was a 21-second video of one person handing a disc to another, followed by a $399 price, $100 under the Xbox One. Microsoft reversed all of it within a month, but by then the reversal read as panic.

Losing a generation isn't unusual. Nintendo lost with the GameCube and came back with the Wii. What made this one different is that the Xbox One and PS4 were the first consoles where people built real digital libraries, hundreds or thousands of dollars in licenses tied to an account. Every game bought on PlayStation made switching harder. The Xbox One sold around 58 million units. The PS4 sold over 117 million. Phil Spencer later called it the worst generation to lose, and when Starfield was about to launch he admitted there's no world where it's an 11 out of 10 and people start selling their PS5s.

Spencer did nearly everything right after taking over in 2014. He pulled Kinect from the bundle, matched Sony's price, put developers on stage instead of executives, made backward compatibility a selling point, launched Game Pass in 2017, and bought Bethesda for $7.5 billion and Activision Blizzard for $69 billion. The Series X launched in 2020 as the most powerful console on the market. By 2025 the PS5 was still outselling it roughly three to one, Xbox hardware revenue fell 31% in a year, and Halo and Forza started showing up on PlayStation. Good decisions five years late don't undo a bad decision that landed at exactly the wrong moment.

So Spencer and Sarah Bond stepped down, and Microsoft handed Xbox to Asha Sharma, a former Meta VP who ran Instacart through its IPO and has no gaming background. The community's reaction was suspicion, and I get it. But her record is walking into platforms that are bleeding and stabilizing them, and she moved fast. She killed the "This is an Xbox" campaign, confirmed Project Helix herself rather than letting leakers do it, cut Game Pass Ultimate pricing months after the previous leadership raised it, and pulled back Project Latitude's plan to push every Xbox game onto rival consoles. That stops the bleeding. It doesn't win anything yet.

The real opening comes from Sony. A couple of weeks ago Sony announced that physical disc production ends for all new PlayStation games starting in January 2028, because digital revenue outpaces physical by more than nine to one. From a spreadsheet, that decision makes itself. It is also the same move that set Xbox on fire in 2013, taking something away from players because the margins say you can. Used games, lending a copy to a friend, trading in a disc you're done with, all gone, and Sony says it won't reverse course. Project Helix alpha kits are reportedly heading to developers in 2027, and the rumor (and it is only a rumor) is that the next Xbox either includes a disc drive or sells one as an add-on. If that holds, Xbox becomes the only place left to own a physical copy of a AAA game, the exact opposite of where it stood in 2013.

None of that guarantees a comeback. Xbox still trails badly in hardware and first-party output. But for the first time in a long time, Sony is the one making the move players didn't ask for, and Xbox gets to be the brand saying you can still own your games.