The original Xbox was the best product Microsoft ever made. Hacked with modchip, XBMC, and emulators, the Xbox was basically my dream entertainment system come true. The authentic Xbox games were just a bonus. 8 years later my modchip still works, the machine has never given me any problems. And I still use it almost every day for watching movies and I still haven't found a more convenient way for me to get my MegaMan, F-Zero, and Gradius fix every now and then.
It may seem trivial, but what I also liked about it was the boot screen menu. It was quite radically advanced, it felt futuristic. Remember this was back when Microsoft was even more frighteningly good at what they do than Apple is today. And when I saw the 3D menu, with all the futuristic sounds and whatnot -- you knew this system was for real. But the Xbox360 seemed a bit like a step backward, it was more refined, but didn't have that badass feel to it. And then Microsoft kind of fizzled away in the years since.
The Japanese (actually, this applies to Asians in general) are very good at making standalone devices, which is why they owned the console industry prior to the 6th generation. Creating integrated platforms where software plays a significant role isn't something that the Japanese are very good at. That's why when Microsoft came in with Xbox Live they were able to steal a huge chunk of the market share.
This is also why none of the Korean or Taiwanese cell phone makers that had huge market shares were able to beat Apple to the iPhone (and even now, all they do is provide hardware for Android, which is American as well), or even beat RIM to making an email-friendly cell phone.
It will be interesting to see the impact of MS's game studios/technology in 3-5 years. By then, TVs and/or sub-$100 set top boxes will be thoroughly integrated into the post-PC app ecosystems and will be powerful enough to run fairly sophisticated games. It's not hard to imagine Blizzard/EA/Ubisoft/etc. targeting the most ubiquitous platform before the "dedicated game consoles", at which point the console game will dramatically change.
So the question, to me, is not the future of the XBox so much as whether MS can leverage their impressive game technology to get a foothold in these emerging ecosystems. I'm generally not a fan of WP7, but the games have some very impressive technology and I think their studios could make something of a completely different caliber than anything Gameloft/Chillingo are doing. If they can create a groundbreaking Halo or GTA-like game phenomenon on their phone platform it could be their best chance to stay relevant in the consumer space.
"By then, TVs and/or sub-$100 set top boxes will be thoroughly integrated into the post-PC app ecosystems and will be powerful enough to run fairly sophisticated games."
A solid prediction, as at least one such device already exists: http://www.roku.com/roku-products (This is amplification, not disagreement or a "gotcha".)
It's great to be a 30+ year old gamer/entrepreneur who is living thru the console wars. The landscape today feels a lot like it did in late-90's. And this piece give you a great glimpse of the dynamics on building a ground breaking piece of software.
It may seem trivial, but what I also liked about it was the boot screen menu. It was quite radically advanced, it felt futuristic. Remember this was back when Microsoft was even more frighteningly good at what they do than Apple is today. And when I saw the 3D menu, with all the futuristic sounds and whatnot -- you knew this system was for real. But the Xbox360 seemed a bit like a step backward, it was more refined, but didn't have that badass feel to it. And then Microsoft kind of fizzled away in the years since.