How the Xbox Shot Its Way Into Gamers’ Hearts

15 years ago, Microsoft redefined the ‘Halo effect’

It was a minute after midnight in Times Square, and the scene was utter bedlam. Lime-green spotlights crossed the winter sky, digital billboards were on overdrive and celebrities like Dwayne "The Rock" Johnson were out in force. But this was not New Year's Eve. It was Nov. 15, 2001, and the center of attention was the Toys R Us store. Inside, a grinning Bill Gates handed a large package over the register to a guy from New Jersey named Edward Glucksman. 

Photo: Nick Ferrari

The world's first Xbox had been sold. By Christmas, 1.5 million of them would be.

That was over 13 years ago—an eternity in tech time. But gamers (and plenty of other people) should be grateful to the first Xbox for starting something that night. "The groundwork laid by the original Xbox was 14 to 15 years ahead of its time," said Scott Steinberg, head of video game consulting firm TechSavvy. "It was the proof of a concept. It created the public appetite for online gaming."

In 1999, the $20 billion video game market was essentially shared by Nintendo's GameCube and Sony's imperious PlayStation 2. Then came the 2001 Consumer Electronics Show when Gates announced that Microsoft was getting into the hardware business. When the $299 Xbox rolled off the line, there was a lot under the hood. An eight-gig hard drive, a Nvidia custom graphics chip and, most significantly, a built-in broadband cable modem. It was a feature the PS2 and the GameCube conspicuously lacked.

In fact, Xbox was a lot closer to being a PC than being a game machine—and that was the hand Microsoft had been playing all along. The company didn't just want to create a cool gaming console but to introduce the idea of a home entertainment hub where people could watch movies and TV shows, listen to music and, significantly, play games with one another. Using its military sci-fi game Halo, followed by Xbox Live (a $50/year online gaming library), Microsoft ushered in the era of multiplayer gaming —a legacy it's built on with succeeding generations of products: Xbox 360 (2005), Xbox Kinect (2010) and Xbox One (2013). "Since the original launch, Xbox has continued to evolve," said spokesperson Letty Cherry. "We want Xbox to be the best place to play, and we'll continue to bring new innovations to the console market."

It hasn't come cheap. Microsoft sank a reported $1.5 billion into the development of the first console. And while Microsoft sold 6.6 million Xbox One and 360 consoles over the 2014 holiday season, it's Sony's PlayStation 4 that holds the top-selling spot these days. Regardless, Steinberg said, credit is due to the pioneer product: "If it was not for the success of the Xbox, we might be several years behind in multiplayer online gaming, in digital downloading, in video systems being seen as entertainment devices. This was the first one."    

Gates: Henny Ray Abrams/AFP/Getty Images