Makes sense! Between chance of failure & rate of change, the odds looked pretty good.
I'm more flummoxed by the fact that a fundamentally social-native offering didn't disrupt the existing ecosystem, in the 2000 timeframe.
We had chat. We had basic web. Keyboards weren't that expensive, were they? Seems a killer feature for kids.
Not straight "the Web on your console", but something more like AOL, Prodigy, and the late 90s portals.
My only explanation is that the 3 big platform companies were still thinking in packaged software/games, sold retail, terms. Hence XBox Live, when it emerged, was essentially a way to get more value (multiplayer) out of the packaged software you bought.