MS was about the only alternative to Tivo and the cable and satellite cos with their own platforms.
It seems very little activity around DVRs and HTPCs in general. The market is much larger than consoles, potentially, since more people watch TV than play games.
But they need to come up with a new TV distribution model, which isn't easy to do, because networks and content owners like HBO are being faithful to Comcast, rather than trying to sell directly to consumers.
If MS had been able to come up with a new paradigm, then the TV features would be compelling.
Imagine, instead of a DVR with x tuners and y amount of hard disk space, you just tag the shows you want to store in your digital locker in the cloud and from that, you can stream it to a set top or any mobile device. That's where the power of the cloud makes sense, rather than build and distribute millions of boxes with tuners and hard drives. Then you dont' have to deal with shit like CableCard or paying people to install your DVR and use these inefficient systems for authentication (like Cable Card).
But of course, doing an end around the Comcast and Direct TVs of the world won't be easy.
Maybe if Netflix and even other tech giants like Google, MS and Apple started buying and paying for content, things would change. Netflix has financed some acclaimed series while Google is supposedly negotiating with the NFL for Sunday Ticket.