The effectiveness of DRM is a totally different subject, but in this situation they chose their bottom line (DRM) over the desires of their customers, taking a gamble that the losses in sales from pissed off people would be less than the gains from decreased piracy.
Microsoft messed up so badly that many people themselves as being on the xBox side of the "holy wars" that swirl around consoles "converted" to Sony.
A brand is a powerful tool. It might not be logical, but people do build emotional connections with brands. As with any power tool, you want to be careful and avoid cutting off your arm.
This is just an opportunity to say "HA, we won! They changed their course of action because of US!!! SUCK IT MICROSOFT"
We all know PC gamers are the master race though anyways, so any subsequent arguing is moot /s
People like myself preferred the system they designed because you didn't need to use the disk and could play a game you owned on any system that you logged in to, just like steam.