The History of the Xbox

By James Holloway

Updated September 22, 2017

Bill Gates unveiled the new Xbox -- with its signature enormous controllers -- in 2001.
i Steve Wilson/Hulton Archive/Getty Images

The 2013 release of the Xbox One marked the third generation of Microsoft's home gaming console. With the software giant so firmly established in the console landscape, it's hard to imagine that there was a time when many believed that the Xbox project was doomed to failure. Over the more than a decade since the release of the original Xbox, the Xbox brand has introduced several important innovations and undergone many changes.

The Birth of a Brand

The original Xbox, released in time for the 2001 holidays, was Microsoft's first entry into the home console market. Microsoft's goal with this new device was to make game development easier by using technology already familiar to PC game makers. However, the Xbox was entering a sixth-generation console market already occupied by the Sega Dreamcast and Sony's popular PlayStation 2; in addition, its release coincided with Nintendo's release of the Gamecube. Within this highly competitive marketplace, observers wondered whether Microsoft's console would prove to be a costly mistake.

The Roots of Success

Although it never managed to outsell the PlayStation 2 -- or even come close -- the Xbox established itself in the console marketplace based on several factors. The most significant for the history of gaming was the introduction of Xbox Live. Although other consoles had some online features, Xbox Live changed gaming permanently by making online play central to the console experience. Another major factor was Microsoft's acquisition of Bungie Studios. Bungie's flagship Xbox game, "Halo," was a huge success and remains one of the most influential shooters ever released; the sequel, "Halo 2," sold a record-breaking 2.4 million copies in its first 24 hours and became one of the most popular games of its generation. A third factor was the huge price cut -- from $299.99 to $199.99 -- Microsoft introduced in the spring of 2002. Sales of the console increased by over 50% from the first half of 2002 to the second, giving the Xbox a foothold in more gamers' living rooms.

Introducing the Xbox 360

As the sixth generation of consoles aged, gamers hotly anticipated the announcement of Microsoft's next-generation console. By not including a new optical disc format -- although an optional HD-DVD add-on was available -- Microsoft beat its main rival, Sony, to market by nearly a year, releasing in time for Christmas 2005. However, early Xbox 360 systems were plagued by hardware problems that resulted in the dreaded "red ring of death," forcing Microsoft to replace the broken consoles. Despite this misstep, the Xbox 360 outperformed the original Xbox and Sony's PS3 in the American market, although both were outsold by Nintendo's unconventional new console, the Wii. One major addition to the console was the motion-sensitive, voice-activated Kinect controller, released in the summer of 2009, Microsoft's answer to the Wii's motion sensing Wii Remote controller.

A New Generation: Xbox One

Microsoft's third Xbox console, the Xbox One, appeared on store shelves in November 2013, just a week after Sony's PS4. The Xbox One featured a more important role for Kinect, as the earliest consoles included Kinect as a standard feature. However, in 2014 Microsoft stopped including Kinect with all systems and cut the price of the console to match the PS4. Microsoft marketing portrayed the Xbox One not just as a gaming console, but as a multi-purpose home entertainment device capable of being your destination for movies and television, videoconferencing, music, and live sports programming. To drive home this fact, the Xbox One can connect to your cable television box and display live television for those times when you want to take a break from gaming.