And it bit them in the ass when Sony pushed games, games, and more games onto the PS4 and have enjoyed being on the winning side of a healthy install base gap ever since.
In hindsight, we see how that decision looks naive. Xbox was always about the games, and the Netflix consumption was incidental. But original programming wasn't a completely stupid idea on its face back in ~2008-10, or whenever it was. In fact, it's possible they could have succeeded; they just never seemed to be able to get the studio off the ground.