That doesn't make sense to me. I won't even mention the fact that having a Sony (or Microsoft) monopoly isn't beneficial to anyone. We need both companies to keep each other in check.
Why would they stop developing XBOX hardware? Especially now that they can use the exact same PCBs on xCloud...
People will nonchalantly say "buy a PC", but have they forgotten the myriads of configurations and what that means for developers?
Pretty much every MS endeavour in recent memory has been a "me too" product that has failed to surpass the product that inspired it.
- iPod : Zune
- iPad : Surface
- PlayStation : Xbox
- Steam : Microsoft Store
- Siri : Cortana
- Google : Bing
Even MS's current darling, Azure, is band wagon chasing the success of AWS.
Microsoft is always coming up a day late and a dollar short.
Why? Because of the corporate culture. You're not going to get innovation if you don't take risks. You can't take risks because the personal loss is too great in that type of environment. Did Mattrick get another chance? Oh no. So what do you do to try and make a difference? You adapt something that is already popular. It's low risk ("It's working for them, it should work for us too!") but it means that you're already competing with hugely successful products that are loved and used by many. It's a difficult sell to tempt people over to your new offering.
MS are all about services these days. Office 365 subscriptions and the rest are massive money spinners for MS.
GamePass is just the next in a long line of MS xerox copies of other external already successful offerings to take advantage of the services model. Sell a full price hard copy of a game for $60 every year to the casuals. Or change them $10 a month whether they use the digital service or not. Which do you think a profit hungry corporation prefers?
Would any company really bother making costly hardware if they could avoid it? Why not let people play your content on any device they already own for a low monthly fee? Do away with all those terrible R&D costs, physical products and creation. Instead make billions just acting as a middle man for their own and third party content.
The only problem with this service model is that you need great content and you continuously need to keep adding it too. Think of HBO and the Sopranos, Game of Thrones. Or Netflix and Stranger Things. Disney's upcoming streaming offering with exclusive Star Wars and Marvel content. All great offerings that people are dying to get their hands on.
Microsoft are in the tricky position where they have signalled that they want to do this (MS games on other platforms was the first step) but the content they're offering is lacking. Content that is so weak that their own first party titles don't even register in the top ten most popular titles on their own platform. How many Nintendo or Sony players are going to be queuing up to get their hands on Forza, Gears, Halo and the rest? Not enough, I would guess. There are too many great games already on other platforms. If there was real demand, the platform offering those games would be more popular. The closest thing MS have to this is Minecraft. Again, not something they produced themselves but bought after the tremendous demand was obvious.
So MS are on a buying spree for content creators. But are these smaller studios going to be pumping out AAA content on a regular basis? No, of course not. Their job is to produce titles that are only "good enough for GamePass"(tm). Snacks that will keep you occupied between AAA meals. Fillers that do just enough to keep you subscribed for that service revenue to continue rolling in. Think about these new studios staggering their releases, so you get something new each month. Titles may slip their original release date but you have other internal studios offerings to take up the slack. Maybe there's a title or two in there each year that has a bit bigger budget or more care and attention spent on it. Most current Xbox owners will probably be happy with that, right? But will people outside of the eco system be tempted to buy into the service and try? Maybe, maybe not. Time will tell.
There are huge costs and undertakings to get things started - game development is expensive. Even the current number of studios isn't anywhere near enough to sustain this model. But once the service is popular, third parties will hopefully release more of their content there too or you can offer them incentives to do so.
Once the service has some decent momentum, you can slow down (and possibly eventually stop) your own releases and let third party offerings continue with the momentum - see Valve with Half Life/Portal etc to Steam only transition.
I have got to admire the ambition of the MS plan but the execution is sadly lacking. I'd be surprised if the Xbox hardware division has many throws of the dice left after this generation.
Of course MS will never admit this is the long term plan. But watch what they do, not what they say. All gamers will be oblivious to it, like good old boiling frogs should be.