one of the issues that MS is facing is the fact that the hardware in they're system costs significantly more then what they are selling for, and video game makers couldn't possibly hope to create a game that utilizes that hardware.
that and they don't have any major video game makers backing them that they didn't buy. they have no support from capcom (except steel battalion, which has since been discontinued), no support from square/enix (except the final fantasy game that has since been cancelled).
they haven't had a big hit exclusive to the system ever! what about halo you say? it will be making it's way to pc in june. and splinter cell? come march 25 it will have come out for every other system. so microsoft isn't even making up for the lost money of console sales with software.
i have turn so many people away from the xbox, i've lost count (i work at a video game store, by the way). all opinions of microsoft aside, the xbox is the crappiest console i've ever seen. the nintendo 64 had better game support then the xbox.