Ben Thompson Explains the XBOX Disaster

Ben Thompson, founder of Stratechery, argues that Microsoft’s Xbox division has been a strategic disaster for decades—not because the hardware failed, but because the company repeatedly pursued a corporate vision that the console business was never going to deliver. The result, he says, is a division that has been self-mutilating for years, and the recent Game Pass subscription push only made things worse.

The Original Strategic Mistake

Thompson traces the Xbox’s problems back to Microsoft’s pre-iPhone corporate strategy of “three screens and a cloud”: the desktop (PC), the pocket (phone), and the living room. The Xbox was meant to be the gateway to the living room—a way for Microsoft to own the TV-connected experience. But the strategy failed for an obvious reason: people who don’t play games aren’t going to buy a multi-hundred-dollar console. The living room was eventually taken over by cheap streaming sticks like the Fire Stick and Chromecast, not by a game console. Thompson calls this a classic Microsoft pattern: they were right that a new front door to online services needed to be built, but they took the wrong approach with Xbox.