The PlayStation 3 had an infamously bad start due to its high price tag, it came out a full year after the 360, and it was harder to develop games for due to its complex and unorthodox hardware architecture. Unlike the original Xbox, the 360 initially outsold its Sony rival. This was greatly aided by Microsoft's developer tools said tools have been praised by, among others, John Carmack of id Software as the best development environment he's ever seen on a console, which helped mitigate the change of CPU architectures from an x86 Out-Of-Order CPU (very much like that in a PC) to a PowerPC architecture-based In-Order CPU (which requires more careful programming). Though its hardware was not PC-based like its predecessor note While the original Xbox was indeed a powerful console, its design consisting largely of off-the-shelf PC components was expensive to produce, and thus Microsoft decided it needed to go with a more customized design with the 360 in order to be more cost-efficient, the software continued to be Direct X-based, thus it was still relatively easy to port games from the PC platform. The 360 featured a new version of the Xbox Live service with improvements over the original.

Down but not deterred, Microsoft came back in 2005 with the Xbox 360 a year ahead of Sony's PlayStation 3 and Nintendo's Wii. While it did decently and even beat the Nintendo GameCube, it only sold well in North America, didn't actually make Microsoft any money, and still got destroyed by the PlayStation 2. In 2001, Microsoft threw their hat into the console race with the Xbox.

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