Xbox Branded Seagate USB Won't Allow Gameplay/Install

I just bought a Seagate external USB specifically branded for xBox. Formatted the drive and expected that it should be able to play the game. I cannot believe that this is supposed to be the case. Did I end up with a defective drive, which I doubt as no errors were found. I am logged in with my gold subscription. Please advise if I have wasted my money on both a game and drive as well as disappointing my son as no place on the packaging does it state that only internal drives were required to play this game.