Sony’s arrogance coming into the seventh console cycle played a large part in their downfall, says a former Microsoft executive.

Robbie Bach, who led Microsoft’s entertainment division through the rise of the Xbox, acknowledged that much of the Xbox 360’s success came because Sony squandered the goodwill and massive market share it built with the PlayStation 2.

"Some of the success of Xbox was due to the fact that Sony did some really not so smart things. They mismanaged their 70 percent market share.”

It was vitally important for companies to capitalise on their rivals' mistakes said Bach, speaking at the Northwest Entrepreneur Network.

"The transition to PlayStation 3 was really, really bad. And really hard. They mismanaged their partners, they mismanaged their cost structure. They made their next platform so complicated that developers couldn't develop for it."

It didn’t help that Sony’s console was released a year after Microsoft’s Xbox 360, he added.

Another factor in the Xbox 360's success was Microsoft's ability to strike up strong partnerships with publishers like EA and Activision.

"When you're doing a startup, you need friends," said Bach.

"It's just the way life works. It turned out we were able to convince retailers and publishers like Activision, Electronic Arts and others, that it was a good thing for Microsoft to be successful, because if we were not successful, the only game in town was Sony. Being dependent on somebody else was bad for them, and so they supported us disproportionately to what they should have, mathematically."

Bach acknowledged that Microsoft had plenty of problems of their own, describing the infamous Xbox 360 ‘Red Ring of Death' failures as "the most painful thing in my life".

The hardware fault ended up costing Microsoft more than a billion US dollars (NZD $1.31b) in warranty extensions.

Bach left Microsoft in 2010.