The Rise and Fall of the House of Xbox | Extra Credits Gaming

Okay, I am sorry to have to do this, but I'm about to turn your gamer bones into dust. It's been nearly 25 years since the OG Xbox burst onto the scene in all of its black and green glory. I still remember those days. Oh my gosh, it was a delight. But now today, outside of things like corporate shake-ups and Game Pass price increases, far less people are talking about this once giant console, which got us thinking about the rise and fall of a system that went from nothing but a sparkle in Clippy's eye to becoming a massive console player, and then right back down so low that even Costco won't sell it. So today, we're going to do a little history lesson and see if we can figure out what the heck happened to the house of Xbox.
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in the description. Now, to better understand how Xbox ended up where it has, just like in our Rock Band and D&D episodes, we got our good friend Eddy Webb to hop into his custom DeLorean Warthog Choopa thingy hybrid in order to show us exactly where the console first got its start. Y'all good, Eddy? All right, here we go. Punch it. Oh, and don't worry if we flip it. I got THESE GRENADES. LET'S GO!
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OKAY, the year is 1998. Microsoft is a home and business computer juggernaut that gamers mainly know for Minesweeper and that Yeti that ate skiers if they made it too far down the mountain. But, they were just starting to develop a reputation as a company that could make other games, partially after the success of Age of Empires, which ended up becoming a signature strategy franchise for the PC. Meanwhile, their internal DirectX team, the folks who worked on multimedia APIs, had been pitching the

idea for a Microsoft native console for years. Comprised of Kevin Bachus, Seamus Blackley, Otis Bourkes, and Ted Hase, their idea had a simple hook. Put a personal computer {slash} multimedia system in every living room, supported with a hard drive and broadband internet. But, the DirectX team on their own was kind of getting nowhere. They needed someone on their side to help them create their vision. Luckily, the Microsoft games division started gaining respect inside and outside of the company after the success of AoE, so the DirectX team suggested their idea to those folks, and Microsoft games decided to partner up to pitch the idea to Bill Gates directly. But, even with that help, the Direct Xbox concept was seen as a risky bet, and it still wasn't getting much traction. That is, of course, until Sony announced that their upcoming PlayStation 2 would be so powerful that it could replace the PC. Shots fired. While Sony did end up walking back those claims, Bill Gates

did see this as a threat, and the console, now called the Xbox, was greenlit to the tune of $1 billion of funding. There was just one problem. Microsoft had never built a console before. Though there were a couple of toe clippings into that space, the first one being the team behind Windows CE, an embedded operating system for devices, did have some experience working on the 3DO and my beloved Dreamcast. Ooh, fun fact about that, actually. The Windows CE team actually tried to take over control of the Xbox idea from the DirectX gang, but their pitch ended up being too conservative, because it's always a great idea to base your new killer console on sure fire winners like the 3DO. Then, Microsoft tried to buy Nintendo, but that went nowhere, thank Master Hand, and eventually, Microsoft realized that they had to figure out how to make this thing on their own. The original idea was incredibly ambitious. Aside from the internal hard drive and broadband connection, Microsoft leveraged premium PC components such as

the Nvidia graphics chip, Dolby Digital audio, and a DVD-ROM. But, their biggest weapon truly was the original DirectX team themselves. See, at the time, both Sony and Nintendo had relatively unfriendly development environments. Their specific technical requirements, often only documented in Japanese, made it hard for some companies to make games that worked well on their consoles. But, most companies that made PC games were very familiar with the DirectX tools. Microsoft was a company built around making an operating system designed to run other people's software, after all. So, they knew how to make tools for other developers to use. And those tools made it way easier to make games for the Xbox. At least, that was Microsoft's pitch when they announced the Xbox at the Game Developers Conference.
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And it was that non-vocal flexibility that drew the attention of Bungie Studios, who was working on this obscure

little third-person shooter they called Halo: Combat Evolved. Microsoft were impressed with Bungie and ended up buying them for $30 while Bungie was impressed with the potential of the Xbox and decided to change Halo to a first-person shooter. This transition from third to first person was despite the fact that most gamers thought you couldn't play a first-person shooter on a console. But, that's mostly because PC gamers were playing things like Quake 4 and not GoldenEye. Anyhow, what this meant was that both Chief and Clippy's father had an uphill battle ahead of them, even though the Xbox was
It's now November 14th, 2001, and over a million Xbox consoles flew off North American shelves within 3 weeks. At

$299, each console was just about breaking even for Microsoft, but the combination of Halo's exclusivity and its sheer groundbreaking quality helped propel this console, along with Microsoft acquiring previous PlayStation exclusive franchises such as the Oddworld series. Though it wasn't all good news across the globe. The Xbox failed to catch fire in Japan or Europe, which were two key markets. Slashing the price in 2002 globally to $199 did help the Xbox to outsell the just released Nintendo GameCube, but the reduced price did make it all but impossible for Microsoft to make a profit on console sales, which isn't out of the ordinary. But where Microsoft shined here was that it was a huge company, and they could absorb that loss against not only the money made from Halo and other in-house exclusives like a normal console manufacturer would, but other divisions in their company as well. We'd even argue that this ability,

due to their sheer size, saved the brand at a critical time, and may have informed some future platform decisions we'll get into later in this episode. But right now, in the early 2000s, the Xbox was a force to be reckoned with in the fabled console wars. During this time, broadband internet adoption also increased, which changed the console landscape again. And to capitalize on this, Microsoft introduced Xbox Live, which treated couch gamers to a multiplayer experience unlike any they'd ever had. Paired with the internal hard drive, the Xbox was able to provide new content for aging games, you know, on top of getting you into a lobby where you could throw sticky grenades onto your friends' backs. With over 150,000 subscribers in their first week, Xbox Live was a massive success, and that number grew exponentially over the years to come. That said, those years to come would be full of other ups and downs. The launch of Xbox Live Arcade, for instance, allowed companies to sell games on the console without having to

make physical discs, a precursor for today, and Halo 2 generated 125 million dollars in sales, having the most successful launch weekend of any media up to that point. I'll say that again, any media. However, by 2004, the console landscape had evolved so quickly that the tech which made the Xbox so innovative had become outdated. Further, although the Xbox out sold both Nintendo's GameCube and Sega's Dreamcast, it still never managed to get close to the PS2's numbers. Well, that's a lot of consoles. So, it was time for a new console to make a new kind of revolution, and get it out before the next Sony and Nintendo ones. But, how many degrees of rotation should this console make? And was it any good at no scoping? Well, there's only one way to find out as we dive [music] into This beast was a game changer. It was

one of the first consoles that had a dedicated graphics card, and it could outperform computers that cost two or three times as much. So, when the Xbox 360 launched on November 2nd, 2005, it ended up selling out in every market sans Japan. I sure as heck remember that day because I was interning at TRL at the time, and on that show they gave a 360 to every audience member in attendance, just not the interns. And I'm totally not bitter about it at all anymore. Think after so many years. Anyway, within a couple of months, the 360 sold more than 1 and 1/2 million units and by the end of 2009 would move over 39 million units, which was quite a bit more than the original Xbox. But the race to get a new console on the market early did nearly tank the 360 as a variety of hardware and software issues plagued early units including untested soldering that led to the now infamous red ring of death, which I have tried to

fix on three different consoles. Never got it going. So how did the 360 manage to survive? Well, for one, despite the slurry of hardware failures, it launched a full year ahead of the PlayStation 3, which allowed developers to learn the hardware and build up a strong library of games including Halo 3, Gears of War, Mass Effect and Call of Duty 4. Second, even after the PS3 launched, Sony stumbled badly with its launch title lineup. This was due to the PS3 architecture being incredibly difficult for developers to use and the price was almost twice that of a 360. Not to mention, Xbox Live did end up being the killer app for the Microsoft console. By 2010, after Microsoft released an upgraded version called the 360S, all of the 360 versions together ended up out selling the PS3 by around 5 million units. Sure, it still trailed behind the monolithic Wii, which Nintendo released after the GameCube got out sold, but the Wii was really doing its own weird this

thing. And with the launch of Xbox Music and Xbox Video, the core vision of a personal computer and media center in every living room was finally becoming a reality. After 7 years, the 360 had confidently secured the console market. So now, Microsoft could just sit back, relax and really take their time to innovate and do something really exciting with their next console generation. Instead, they made Xbox One. To say this console stumbled out the gate would be a minor understatement. Only this time it was over the announcement of requiring an always-online connection to play games and, you know, whatever the Kinect ended up not being. On top of that, Microsoft announced a $500 price point, which Sony immediately followed by announcing the PS4 for $400 and pointing out that you can share PlayStation games by just

handing the disc to someone. They actually did that last part in the most Mean Girls way possible. Can we roll that clip, please?
This is how you share your games on PS4.
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Thanks.
PlayStation.
Microsoft eventually backtracked on price, the forced online connection, and bundling every Xbox One with a Kinect. On the flip side, they also launched Xbox Game Pass, allowing subscribers unlimited access to older Xbox games. Because Xbox has truly been really great with backwards compatibility. However, there were just few exclusives on the Xbox One, with most of the best games also being released on PC, reducing the need to buy Microsoft's new console. Further, Sony had built up a large collection of studios who could simply out-produce Microsoft's first-party development teams, and Nintendo was still doing its Wii thing. Oh, you had a

Wii? Nice, me too. Anyway, after a few more years, Microsoft launched both the One S and One X, which offered 4K output and a 4K Blu-ray player. But, tricky naming conventions aside, the S and X ended up splitting the market, and developers now had to optimize for two very different systems. So, it kind of seemed like at this point, Microsoft had focused too hard on the online component with the announcement of the Xbox One, as well as not really reading the room on what people wanted. And arguably, every subsequent release was still scrambling after those initial missteps. Meanwhile, Nintendo stumbled with its own ill-named console, the Wii U, and they ended up pivoting to an entirely new model just 5 years later with the Switch, which rapidly outpaced all the other consoles, becoming the second best-selling console ever behind the PlayStation 2, the very same console that inspired Microsoft to enter the console scene in
the first place. So, between all this and the One and the One S and the One X,

Microsoft still had the most Xboxes. In fact, there were so many that it kind of left people asking,
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The year was 2020, and in a world where we were all glued to tiny screens in the palm of our hands, the simple hook of a personal computer and media center with internet connectivity in every living room, well, that just seemed kind of commonplace now because you could put all that in your pocket. But in that landscape, instead of consolidating the two branches of Xbox One S and Xbox One X, they doubled down again and simply made newer iterations of both, the Series S and Series X. Each was different, but they basically boiled down to being the Xbox and the budget Xbox, and neither lit the world on fire. Heck, the Series S didn't even have an optical drive. Now, sure, there was less

physical media in 2020, but for a lot of the Xbox's potential audience, their living rooms did still have shelves full of DVDs, Blu-rays, and even CDs. Microsoft might have saved a few bucks removing the disc drive, but it was another step further away from the media center idea, and another step away from that instinct to worry less about profits that saved the original Xbox in its early life. So, what's the next move Microsoft makes? Maybe get some killer exclusives? Perhaps put out one clear console with an updated hook as clear as their original vision to get gamers pumped again? Nah, they just told everyone that they didn't need to buy an Xbox at all. Backing up for a second, first they haven't made a console in-house themselves since the Series S and X. Seeing the return of handheld gaming with the Nintendo Switch and later the Steam Deck, Microsoft partnered with ROG to release the Xbox Ally and Ally X to play Game Pass games. Pretty neat, but also pretty pricey. But then the marketing emphasis kept coming

back to Xbox as a concept, not a console, selling Game Pass, cloud gaming, and quote Xbox everywhere. They of course then launched their now illustrious this is an Xbox campaign trying to convince people that you don't need to buy an Xbox to play Xbox. This made it clear more than anything else that Microsoft wanted to move away from sell consoles being the main goal of the Xbox brand. This was also a campaign so bad even Microsoft's own employees seemed to hate it. Now, that direction might be where the company wanted to go, but the Xbox brand was built around consoles, not cloud gaming, and from other console sales numbers, seems like people still wanted consoles. Heck, at this point Microsoft had lost so much credibility that Costco, the third largest retailer globally, ended up de-listing all Xbox consoles in late 2025 right before the holiday season. And Costco only de-lists things which

don't sell at volume. Other Microsoft decisions, such as trying to cram Copilot into every Microsoft service possible, also really hasn't done the company any favors even though it's supposed to come to the Xbox Series S and Series X sometime in 2026, eek.
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Breaking news, as if the console gods have been watching the production of this episode all along. While our artist Scott was animating this very script, Xbox CEO Asha Sharma posted that co-pilot development for the Xbox consoles will stop. Also stating, quote,
[clears throat]
"You'll see us begin to retire features which don't align with where we are headed." Unquote. In related news, Blinks the Timesweeper also said, "Thank the time crystals, I won't have to clean up this glitch." Before proceeding to poop in a box that we have been assured cannot run Game Pass. And while both of these pieces of news are equally wonderful, it does leave this news anchor wondering

specifically about
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So, as we approach the 25th anniversary of the Xbox, is this episode just a eulogy for a once innovative game console? I mean, I sure hope not. Actually, at the time we started writing this script, Microsoft announced Project Helix, which they say will be a return to the console space. Plus, there's been a big shake-up in the leadership of Xbox these days, which has a bunch of different people either psyched or super worried. But, here's the thing that is making me feel okay about the future of Xbox. In a lot of ways, Microsoft is back to where they were when the OG Xbox first launched. They aren't currently thought of as leaders in the gaming space. The other major companies have massively successful consoles. And gamers, yeah, we're still hungry for a new experience. Then also, you have to

take into account that while the gaming industry is in a vastly different place than it was in 2001, a lot of the fumbles that Xbox had seem like they might have just fumbled because they came out too early. Like for instance, when the original Xbox launched, cartridges and discs were the only way to play new games. Now, even though I love my physical media, downloading games has become the norm. Secondly, PC gaming was only a small percentage of the gaming industry back then, around 5%, but now with platforms like Steam and devices like the Steam Deck, the line between PC and console gaming is blurrier than ever, even before the Steam Machine. And finally, as much as we've given Microsoft a lot of guff about the always-online focus that they fumbled so hard, there are elements of that approach, such as seamless patch downloads and having game saves automatically uploaded and synced to the cloud, that are now a major part of the space these days. It is a different world, to be sure, but we do still think

there's room for something akin to the simple elegant concept from back in the late 1990s. Because then, Microsoft had a vision for one box that had the power and flexibility of a PC, stripped down to just what was needed to play games and watch and listen to multimedia. It offered a set of tools to make developing games easier. It leveraged internet connectivity to let people play together and play the games that they wanted. You could watch movies, download the latest patch, jump into an online skirmish with a friend, and clock a few hours on your favorite RPG, all on one device, you know, on a box in your living room. And sure, Microsoft has stumbled lately. Heck, some thought it would stumble out of making Xboxes entirely, which is a pretty big oops from a marketing perspective. But you also got to remember, Sony and Nintendo have both had consoles that had people asking if they lost their way. And for every Switch, there is always a Virtual Boy. Sony and Nintendo have recovered from their mistakes, so why can't Xbox? Every new console generation, after all, is a chance to win or lose again. But it

does require innovation and not just iteration. You can't keep making the last console, but better, and expect to stay on top. So, I think what I want you to take away from this 25-year retrospective of the Xbox is that we should really focus on celebrating the handful of designers that had a radical vision for where gaming could go, and how today we are living in that vision. And that's the legacy that gets me excited to see if Project Helix means the Xbox team can reinvent themselves again. But while I cross my fingers on that one, I really like all of your takes on this. Do you think the past and current foibles of the Xbox brand are just too much for it to bounce back? Or do you expect them to rise like a bright green phoenix and help usher us all into gaming's bright future? Or, you know, anything in between. Leave them all in the comments below because I am just fascinated with all of the ebbs and flows of this gaming history, and I'd love to hear what you all think. Until next time, everybody. We got to get back to 2026. You ready to go, Eddie? Eddie?

Where did he go? He left us. He left us in 2001. I'm still not over that D&D episode argument. Well, thanks, Zoe. What are we going TO DO NOW?
[screaming]
I LIKE WHERE YOUR HEAD'S AT, CAT. Let's do this. This episode was made possible due to our wonderful YouTube members and amazing patrons over on Patreon. And if you'd like to help ensure the future of Extra Credits and even get your face immortalized in being formed, then click the join button below or head over to Patreon right here. Then you'll be joining the illustrious ranks of Angelo Valenciana, Dominic Valenciana, Hunter Z, Joseph Blame, Lotus Wolf, and Ziliads Architects, who are the best legendary patrons.