It started a bit earlier than that. Sony's WebTV came out in 1996. Which fed perfectly into Microsoft's paranoia that the web was about to make Windows irrelevant.
Absolutely. I meant XBox planning proper, but you're right, this paranoia goes back as MS also had WebTV in the 90s as well (I don't recall Sony's, but I'm not surprised that they had one).
Sony's WebTV was a set-top box (Phillips produced them as well) for WebTV Networks, Inc. Microsoft later bought WebTV Networks in '98.