Microsoft have serious trust issues
This Xbox One disaster clearly shows most people just do not trust Microsoft. The uproar wasn't about what MS said they were going to do (I really don't think that many gamers live in submarines with no internet) it's what they were giving themselves the ability to do should they feel inclined further down the road.
The previous Xbox One strategy was essentially, here you go MS, you look after the digital keys to my games in your cloud so I can access them wherever I please without discs. This is something people do with other companies quite willingly and think nothing off it. Most people are quite happy to upload even their most private data to Google or keep a library of games on Steam. It's relatively inoffensive in itself but relies on the user seeing some value in this 2 way relationship (Steam sales being a good example) but more importantly, trusting that company not do anything malicious with their stuff. Microsoft don't have this trust.
Steam could offer the best gaming sales in existence but if they started doing undesirable things with people's licenses it would all fall apart. Google as a company wouldn't even exist without this trust, look at how quickly they responded to the PRISM allegations. I'm not going to get into how or why people lack trust for Microsoft, it's different for everybody. We've ended up in a scenario where those who do trust MS and want the benefits of cloud gaming getting irate at those who don't trust them and want to keep the keys to their games firmly in their hands. This is a major problem for them, you can't embrace a digital future with a userbase who wouldn't trust you to look after their pet goldfish, let alone their beloved game library.