You have this oriented in a parabola shape, but I think it's more linear. The story of the Xbox brand since 2005 has been one of profitability. I really think we ascribe too much "personality" to the hardware manufacturers, talking about the "Phil Spencer Effect" or Shu tweets. I think the shift to "console for everyone" was more about reducing the absolutely aggressive pace at which they secured exclusives, developed partnerships, featured titles, and things like that. In other words, they had to find a way reduce their customer acquisition costs, which were very high (especially because they were forced to rip customers away from Sony, the leader last gen). Kinect is logically, to me, part of that (part of the ERA OF BIG SPENDING, which is why they were so happy to just write it off now). That's not to say that Sony hasn't done the same thing, though obviously they have to do that for different reasons.
Take your point about Rare and acknowledging the rich legacy of the some of the developers within the company. They get to put out Rare replay and it's a celebration of Rare's history, but last generation they got to work on a brand new AAA entry in one of their biggest franchises that was completely and totally separate from the games that came before it (illustrating that they had complete creative freedom). They also got to develop an entirely brand new transmedia IP in Viva Pinata. I don't know much about Sea of Thieves, so I'm not going to talk about it because ultimately we don't know what it will be like, but the story of Rare is clearly "doing more with way, way less" so far.
I think both manufacturers were looking at this generation as a chance to lick some wounds, a logical and necessary conclusion to what happened last generation and the generation before that.
Errrrybody just getting cheap. That cheapness just has a public face now and the face is so friendly. But everyone is far more conservative, far more focused around increasing their ARPU, etc. Shu has basically admitted WWS is making big budget AAA games or they're not making anything. There are some token efforts around the edges...like unlocking XBL non-gameplay features from XBL or getting rid of Online Passes at Sony-- but they basically had to do these things because they were key advantages of competitors and there was no more effective way to reduce acquisition costs.
edit: This also describes Nintendo, I think. They were certainly surprised by the costs of HD development and basically all of their profitability improvement in the last 2-3 years has come from dramatically slashing costs at the operating level. It's not a topline growth story anymore for any of these guys (well, maybe Sony).