I disagree. I think people overestimate that damage. The console audience has shown that it doesn't hesitate to switch sides when someone else offers a better product. For much of its lifecycle Xbox 360 was a better product than PS3. PS4 is a better product than XB1. If XB2 proves to be a better product than PS5 then most people will buy that.
There is a lot of stickiness to a brand. The issue wasn't just that the PS4 was a good product. It was that the XB1 screwed up so bad. If Microsoft had just made an iterative improvement over the 360 with the XB1, it would have done much better regardless of what Sony did. The problem for Microsoft was that the XB1 actually took a step backwards in many areas, which created in opening that Sony seized on.
Xbox doesn't get nearly enough credit for the things it has done right. As a platform is services, it's a much better value than the PS4. Things like Games Pass, EA Access, Backwards Compatibility, a baked in looking for games feature, preview program, early access games, and more.
Xbox has spent the last couple years building out the feature set of the platform in really cool ways. I can't remember the last really awesome feature Sony implemented into the PS4 platform. PS Now?
That is a repeat of the pro-Xbox arguments we had at the beginning of this generation. The truth is contained in your first sentence. People don't really care about all that stuff. They are all second tier or worse on the console buying decision tree. Price, games, performance, and network effects are all far more important. Only when those don't provide a clear winner do other considerations matter.
The Xbox One X is a solution to a problem Microsoft will have two or three years from now. That's why it's so perplexing what their plan is and how it may do for them. Taking a chance on upgrading hardware, at a $100 price increase, without closing the software gap? And saying it's a niche premium product where clearly that's not the market they should be addressing?
It's a gamble. Maybe it will sell really well and it becomes the de facto multiplat machine, and maybe that will translate to more first party games and exclusives. Maybe it will sell enough to keep the Xbox brand in the conversation and be a nice second or third place console, or sell to folks who are interested in the Halo/Gears/Forza cycle.
I don't see this moving through needle forward in any capacity, but clearly I'm not smart enough to be in Phil's position so we'll all see when the NPDs come out this holiday and for the next year.
Like the PS4 Pro, the XB1x is not meant to be a mass market device. It is there to compete with the Pro and help regain Xbox's brand as an enthusiast's console that the XB1 so tarnished. It is meant to stop the bleeding until whatever Microsoft decides to do next.
One thing people aren't considering regarding the Xbox's exclusive situation is that it take 3+ years to make a new AAA game. Microsoft gambled on a move away from gaming towards multimedia at the start of this generation. They wanted the exclusive content on the XB1 to be more videos, less games. As a result, their gaming production capacity suffered. By the time they accepted they had made a mistake, it was too late to hire/create development studios and make new games that would come out this generation. The best they could do was to buy some timed exclusives, and start some smaller games.
That all assumes that Microsoft wants to have a strong gaming presence, and is not just trying to make the best of a bad situation. A good case can be made that gaming was only one of many attempts to control and/or preempt others from owning, home TVs. Once they felt they had secured their spot with the 360, they shifted their focus back to the original TV strategy.
