Well, the whole DRM fuckup hurt them far more in Europe since we have a far stronger awareness of privacy issues. Couple that with the continuous barrage of Snowden and NSA scandals at/after the launch and the US as a whole lost its lustre. Bad climate to try and sell a very US-centric design like that. Add to that their foot in moth moments like the tier 2 issue. They didn't catch a break the entire time through.
Plus, we're not the US. We're a bunch of countries that decided to work together. Not a single entity like they approached the market as. One of the most striking examples would be that by and large we do not have a use for set top boxes since most of the time the receivers are built into the TVs and the standard cable companies target those instead of trying to roll their own. So, no place for the XBox to overlay its fancy menus or add value. Plus, our market is far more fractured (we're a bunch of independent countries after all) so whether their EPG features would work was questionable at best (just ask Nintendo and their TVii thing). That made the whole HDMI in port a gimmick, or worse.
Also, many people keenly remember the tier 2 treatment from the 360 days. In many countries, Live was not much of a value-add beyond the online unlock. That's the crux of a relatively young loose gathering of many countries, giveaways and digital media distribution rights need to be hammered down on a per country basis, which drastically reduces the amount of wriggle room for content for a non-media company like MS. Even with all the unification progress in the last decades there's still a crapload of local laws to keep tabs on. IP laws and contracts are confusing as shit already without that added complication. That made the offerings, giveaways and feature set rather sparse for many of MS's customers. Live was pretty much unappealing outside of a small niche, heck, it arguably still is.
Plus, hey, Sony already had a good foothold from the PS2/3 days and swiftly latched onto the "we are not MS!" angle.
Speaking of which, MS marketing has been pretty crappy too, probably partially because of the aforementioned fragmentation again.