Blurring the line has been a commonplace corporate desire for decades. Several 8-bit consoles offered computer-y upgrade paths. Atari jumped back and forth. Apple had a disastrous partnership with Bandai. Basically, console companies wanted the expensive feature set of any full computer, and computer companies wanted the massive sales figures for games on low-priced hardware.

Microsoft specifically had a mildly jingoistic desire to dethrone Japanese hardware in general and the explosively successful Sony in particular. The original codename was "Midway." They put together a low-cost WebTV-based Windows CE machine which was gradually acknowledge as complete garbage. So instead they shipped a Pentium 3 PC. Somehow this worked. They never fixed the slow-ass startup time, but they disguised it with an aura-farming boot animation and menu. They made full use of the hard drive by letting you rip CDs and put your own music into gameplay.

The project fully succeeded in the Xbox 360, which used PowerPC instead of x86... and made the hard drive optional. This was an attack which Sony barely dodged. The PS3 was intended to ship without a video card. They thought the Cell would be powerful enough on its own. And it might've been - for games developed specifically around it. Even just as a CPU, there's a reason Uncharted is butter and Oblivion is molasses.

See, what PC devs had spotted was that console games could now be identical. The Dreamcast supported a weird number of shooter engines in its short lifespan. The PS2 had GTA's beloved 3D trilogy, which all came to PC verbatim. And between consoles, devs no longer needed The Good Version outsourced as third-party ports; they could just make the game once-ish. This was made unmistakable by RenderWare until EA bought it and killed it.

So Microsoft offered a dead easy time being one of the platforms any game could support, to balloon its potential customer base. But because the hard drive wasn't standard, games had to be designed around discs and memory cards. This pissed off a lot of PC players by introducing load screens everywhere and forcing a reliance on autosaves, but obviously it was great for Microsoft's business model of getting one-third of gross revenue on games they didn't make.

MS didn't pursue that from an online store because that would mean competing with... stores. Software comes from Wal-Mart. Right? If you saw Age Of Empires II in a magazine, it wasn't exclusive to anydamnwhere. The big-ass boxes were on the shelf at Target, beside the CDs. If they didn't have it then you'd check Electronics Boutique. I first bought Half-Life at CostCo.

MS didn't copy Steam later because Steam exclusively sold Windows games and was exclusively for paying customers. Frankly MS would probably still be the backbone of PC gaming if they hadn't spent the last decade making Windows overpriced, fat, slow, invasive, inconvenient, persnickety about hardware, and festooned with ads.

MS isn't fighting Steam now because even they're not as dumb as Epic.