Microsoft enters the console business with a shooter as its anchor

What happened

The machine was essentially a personal computer redesigned for a television, built from familiar parts and unusually powerful for its moment. Two decisions set it apart. A built-in hard drive meant games could store data without memory cards and could stream assets during play. A network port, standard rather than optional, assumed that broadband would arrive in homes and that consoles would need it. Both looked like expensive indulgences at launch and became defining features of the generation that followed.

Halo did the persuading. Bungie's shooter had begun life on a different platform before Microsoft acquired the studio, and the version that shipped solved a problem that had defeated many earlier attempts: how to aim comfortably with two thumbsticks. Regenerating shields, a two-weapon limit and vehicles that handled well turned firefights into readable, repeatable encounters. Four-player split-screen and support for linking consoles together made it a party fixture on college campuses and in living rooms.

Commercially the console lost money and finished behind the PlayStation 2, but it succeeded at what it was actually for. Microsoft established itself as a hardware company that developers took seriously, particularly in North America, and bought itself a seat at a table it had never sat at before. The losses were treated as the cost of entry into a market the company had decided it could not afford to sit out.

The world at the time

Console making had been a Japanese business for nearly two decades. Sega's departure earlier in 2001 left an opening, and Microsoft, worried that a games console might become the household's main entertainment computer, decided to build one rather than watch someone else own that position. Few observers expected the effort to last.

What it changed

The hard drive and network port made a subscription online service possible a year later, which became the platform's real advantage. Halo grew into a franchise that anchored Microsoft's hardware for two decades, and the company's willingness to absorb heavy losses to establish a platform set a pattern it repeated with services and acquisitions.