Xbox (console)

Lore & Background

Microsoft began developing the Xbox in response to the impending launch of the PlayStation 2, which CEO Bill Gates saw as threatening the Windows PC business due to its support for CD-ROM and DVD playback. The project originated in 1998 with four engineers from Microsoft's DirectX team—Kevin Bachus, Seamus Blackley, Ted Hase, and Otto Berkes—who discussed a console running on DirectX technology. The project was codenamed "Midway," referencing the Battle of Midway as a representation of Microsoft's desire to surpass Sony. The console would run off Windows 2000 using DirectX 8.1, allowing PC developers to easily transition to making games for it.

A key internal dispute arose between the DirectX team and Microsoft's WebTV team, who wanted the console built as an appliance running Windows CE. The DirectX team argued for repurposing PC hardware components, including a hard disk drive. After a meeting on May 5, 1999, Gates sided with the DirectX concept. However, the project faced further challenges when the cost and scope changed dramatically, leading to a February 14, 2000 meeting called the "Valentine's Day Massacre," where Gates vented about the new cost proposal. Despite this, Gates and Steve Ballmer gave the project the go-ahead. The Xbox was the first console to feature a built-in hard disk and supported broadband connectivity via an integrated Ethernet port; Microsoft launched Xbox Live, a fee-based online gaming service, in 2002.

Reader's Guide

The Xbox had a record-breaking launch in North America, aided by the popularity of the launch game Halo: Combat Evolved, with Microsoft selling 1.5 million units before the end of 2001. Cumulative sales reached 24 million, including 16 million in North America. However, Microsoft lost over $4 billion on the Xbox, unable to make a steady profit because the manufacturing price was far more expensive than its retail price. The Xbox outsold the GameCube and Sega's Dreamcast but was vastly outsold by the PlayStation 2. It underperformed outside the Western market, particularly selling poorly in Japan due to its large size and an overabundance of games marketed toward American audiences. Microsoft discontinued the Xbox in 2006 and closed its online services in 2010. The popularity of blockbuster games such as Halo 2 (2004) contributed to the popularity of first-person shooters and online console gaming. The Xbox was the first in the Xbox line of consoles, followed by the Xbox 360 in 2005, the Xbox One in 2013, and the Xbox Series X/S in 2020. All subsequent Xbox consoles are backward compatible with select original Xbox games.