In 1997, only about 36% of American households had a computer, and only half of those were connected to the Internet. Which I suppose is why Microsoft bought WebTV that year and then started working on their "Universal Settop Box", a device that was all about "fusion": all your multimedia and Internet use would happen through the same device and display. I played around with one at Microsoft's Mountain View campus.
I don't remember if Microsoft ever released a product based on the Universal Settop Box. Maybe as MSNTV boxes? But I think the XBox at least partially evolved from it.