You're deliberately ignoring hardware being down 6%. Their software business is fine. Their hardware business isn't.
If the Xbox business is growing
except for the Xbox hardware, that sends a bad signal to Microsoft. It tells them that with the right sequence of decisions, they can divorce themselves of an extremely expensive arm of the business.
They're already doing that, and if their current hardware business keeps trending down, they will continue doing that. The conclusion to a downwards trending business is at some point = no more business. No more console, no more Elite controller that you love; no more hardware.
That's not good for the industry. Less hardware = less options.