After getting a thorough throttling from the internet community Microsoft decided that it wasn’t such a good idea to control the used game market and to place their anti-piracy measures over their fans. DRM (Digital Rights Management) tends to hurt the consumer more than the undesirables and in my opinion would have cost Microsoft more in the long run. You can’t defeat the pirates, they actually enjoy thwarting you.
There is some evidence that media piracy increases sales and fairly clear evidence that the major media companies are lying through their teeth when it comes to piracy loss figures. I am by no means advocating piracy, but if these companies started pointing their resources at trying to compete with piracy rather than stop it the world could be a much happier place.
Piracy aside, this started with a fundamental problem with Microsoft culture. Instead of listening to their customers and how they use their products Microsoft tends to want to dictate what is good for you. This was true of almost all of Microsoft’s retail divisions except for the Xbox until recently. Now no one trusts them.
I didn’t buy all the doom and gloom surrounding their original announcements and their console will probably be great, but they dug a hole for themselves and now they need to dig out. Sony has taken full advantage of these shenanigans and will probably win the console war in the short term regardless of actual merit. Somewhere on a beach Nintendo is sipping a tall drink and snickering.