Seamus Blackey (one of the guys behind the original Xbox) stated that the perception that MS's console would be some sort of generic media box was a perception he fought hard against in the run up to the Xbox's release, so it was bizarre for to see MS intentionally slap a generic mediabox label on their console at the initial press conference.
Jason Rubin (Naughty Dog cofounder) thinks that MS's problem was messaging, not policy...
Patcher noted that while nobody dislikes extra functionality, they do object to paying extra for functionality they don't care about. X360 owners that didn't use Netflix weren't bothered by its inclusion because it cost them nothing, while many potential Xbone buyers with no interest in Fighters Uncaged or the NFL are adverse to paying extra for the Kinect. Patcher's opinion is that MS should cut the price of the Xbone by $100 even if it means chopping the Kinect.
All three agreed that the price differential was unsustainable. Patcher stated it would make sense for MS to slash the price and chop the Kinect, while Rubin and Blackley thought that there were factors within MS that pushed MS to include a camera gamers hate, and that rather than try to overcome such factors, it would make sense for MS to convince them that eating the price of the Kinect would pay dividends down the line.
Patcher still thinks that the Xbone is going to become a 'free' (with a subscription) cable box down the line. I'm sure MS's media obsessed management wants such a deal, but I don't see why cable companies would want such a deal since it would destroy their monopoly and make the new gatekeeper a powerful company that doesn't play well with others.