Microsoft releases the Xbox gaming console on this day in 2001, dramatically influencing the history of consumer entertainment technology.
Microsoft CEO Bill Gates first decided to venture into the video game market because he feared that gaming consoles would soon compete with personal computers. At the time, Japanese companies Sony and Nintendo dominated the field, and no American company had challenged them since Atari ceased selling its Jaguar console in 1996.
Sony was positioning its Playstation 2 as an “entertainment system” meant not only for gaming but also for playing DVDs, music and other media. In order to rise to this challenge, Microsoft designed the first-ever gaming system to use PC technology, such as an internal hard disk drive. The original plan was to include a dial-up modem, still a common internet technology at the time, but the designers opted instead to exclusively use a high-speed Ethernet cable, a decision which would allow the Xbox to set a new standard in online gaming. Microsoft acquired the game developer Bungie and used its new first-person shooter, Halo: Combat Evolved, as its launch title.
Developing the Xbox had been enormously expensive, and the cost of building each unit outweighed the sales price, which meant game sales were crucial to the project’s success. Luckily for Microsoft, their launch title was one of the best-selling and most celebrated games of all time. Halo ushered in a new age of first-person shooters and online gaming, revolutionizing the video game market, and it established Xbox as a haven for innovative game design. Microsoft is said to have lost $4 billion on the initial Xbox, but its successors have sold over a hundred million units and continue to set the standard for entertainment systems.
READ MORE: The History of Video Games