Because you can't materialize a new closed-source operating system in time for a console lifecycle without basing it upon some open source one.
So you don't have much choice: it's Microsoft or open source, and guess what? Microsoft already have a console of its own.
And I doubt they would actually prevent you from making your own competing console, because A) Windows is a separate division from Xbox, and B) Xbox is a lot more than just a console that runs Windows. Just because they make their own tablet computers doesn't mean they're preventing people from making tablet computers.
If Windows doesn't count as closed-source software, then nothing does.
I would say Java is a good example of Open, Non-Free software. Oracle has made it very clear that anything Free in Java is only a Sun legacy, they would rather it weren't, and they'll chase down any lead they can to stop people from using the Java source in their own projects.
Given that the Windows source code is nowhere near as hard to obtain as you seem to think, I think it is more convenient to consider it as Open, Non-Free as well. You don't really need to be a partner or a large customer, just about anyone can get it with an MSDN subscription. A friend of mine had access to the Windows source for a research project he was doing in undergrad. He discovered a memory leak in the VC++ runtime and was able to patch it. He wasn't doing anything with operating systems specifically and he most certainly did NOT pay anything for this access. Their system for building set-top boxes and the like is completely based on recompiling the source code with your personal configuration of kernel modules you'd like to include.
I would contrast this with Adobe Photoshop as an example of very-Closed, Non-Free software. I'm not aware of anyone outside of Adobe receiving Photoshop's source code post v1.0. I've worked with a few 3rd party libraries, developed by one particular government agency, that I could not get the source code to as an employee of another particular government agency, no matter how hard I tried and how bad of a memory leak it had that they refused to fix.
I know it's cool to bag on Microsoft around here, and I'm not terribly fond of them myself anymore, but I'm not going to let myself be deluded about what one can be capable of on their software. You almost certainly have competitors building software on an MS platform and you should not make the mistake of assuming they're doomed from the start.
If Microsoft could call Windows 'Open Source' I have no doubt they would. Instead, they call it Shared Source (through their Shared Source Initiative, surprisingly enough).
Microsoft themselves don't consider it Open Source. The people that essentially invented the phrase itself don't consider it Open Source. I don't know why anyone else would.
I'm really not. Windows is closed-source in that the source is not readily available - nothing to do with "Free"ness. Agreed that Java is a good example.
> Given that the Windows source code is nowhere near as hard to obtain as you seem to think
Perhaps it's easier than I'm aware. To my knowledge, the access routes are all through the Shared Source programmes, and they have specific eligibility requirements: http://www.microsoft.com/en-us/sharedsource.
So I expect we're just disagreeing about the extent to which code must be "open" to count as "Open" - I'd posit it being available for public access, but I could be convinced if it were available to all customers.
> I would contrast this with Adobe Photoshop as an example of very-Closed, Non-Free software.
Fair enough - there are examples of "more closed" software.
> You almost certainly have competitors building software on an MS platform and you should not make the mistake of assuming they're doomed from the start.
I'm certainly not making the assumption that using closed-source software is always a bad decision. There are obvious benefits to using open source, but it's not always possible, and in many cases doesn't make much difference. But I can't get behind the argument that Windows is "Open Source" in any meaningful sense - even Microsoft describes it as "shared"!