The more I think about it, the more the OEM license model makes sense. I remember when Phil Spencer was talking about a device having other stores like EGS, he referenced Microsoft's history as a "Windows company". That's a history built entirely on licensing. I could definitely see Microsoft getting away from the gaming hardware market entirely and letting the Asus and MSIs of the gaming world slap the Xbox brand on their devices. If they are able to create that compatibility layer with Xbox OS running inside a Windows PC then that's opened up their Xbox store to a huge number of devices. Imagine playing Xbox 360 games in Windows. Amy Hood said it herself.
"I do think the real goal here is to be able to take a broad set of content to more users in more places, and really build what looks like more to us, the software annuity and subscription business"
Microsoft executives have been foreshadowing what is coming for Xbox since last year starting with Phil Spencer's proclamation that Xbox lost the console war to when they started dropping hints about becoming more of a third party publisher. So when Amy Hood is talking about Xbox as the "software annuity and subscription business" then I can certainly see hardware being spun off to companies who work primarily in hardware.
Or I could be totally wrong and we get another Xbox console, but to me that is the least likely scenario.
IMO MS's best chance is something in-between. Gaming hardware isn't completely fruitless, after all the controllers are part of gaming hardware in a sense and those sell quite well. But there is always going to be a desire from them (or any platform holder) to have some stake of control in their gaming ecosystem. I just don't know if Windows is ready to do that in a way Xbox already does when it comes to being controller-friendly, relatively seamless, secure, and jump-in-and-play (not requiring specific fiddling of settings on a per-game basis the way that still exists for lots of PC gamers, tho nowhere near as rough as it used to be prior to modern Windows OSes).
I don't think there's much an interest from OEMs to just license the Xbox name and slap it on a Windows gaming PC box, so MS'd have to offer more. They'd need a full-on controller-friendly gaming frontend UI to license at the very least, that's customizable by OEMs. Well, they already have that...with Xbox. Probably better if they can couple that with a standardized performance spec, something else they already have...with Xbox. Those two things are either non-existent or too open-ended on PC, or redundant in the form of a gaming UI frontend because that'd likely just be a mode setting for Windows 12 or something, which would mean it's just bundled into the Windows license.
That's why Xbox hardware probably isn't
completely worthless to them yet; no doubt in the grand scheme of things MS would want to move all their gaming efforts to Windows & PC, but that will probably require a lot of time. It'd require getting full emulation of OG Xbox, 360 etc. on Windows. Finding a way for people to legally transfer all their Xbox purchases over generations to Windows. That's on top of getting a good gaming UI frontend in Windows that works effortlessly with a controller, and having to do all of that while maintaining nothing gets broken kernel-wise that'd hurt other Windows applications.
It's a lot to get done and it doesn't feel like 2-3 years from now is enough to get it all done. Not to mention, MS'd still have to find a way to monetize that initiative in a way to make up for lost console revenue and profits. So an "in-between" approach where they still leverage Xbox hardware more or less as-is but add in more PC-like modularity/flexibility, and Windows features through whitelisting apps and extending Xbox OS functions for natively running whitelisted Windows apps through compatibility layers (and doing some trickery I guess to have Xbox OS directly handle other parts to maximize compatibility & performance), is probably the best approach.
Then that way while they open up the platform to other gaming platforms like Steam, they can just easily tie that access to Game Pass, where on "console" it'd be easily accepted as a trade-off. That way while you're paying a bit more for the hardware, part of it can still be subsidized through Game Pass, and the people who'd pay a bit more to access Steam that way will do so. After all, if the console experience is still so preferable for them, they'd prefer that alternative vs. a PC, and if the price is somewhat reasonable on the hardware while still offering relative performance to say PlayStation hardware, combine access to stuff like Steam or EGS with PC-like modularity upgrades and running whitelisted Windows applications...that could actually attract interest to Xbox that hasn't been present for the past decade. It'd finally be able to
be something other than just an off-brand PlayStation.
But for all we know Microsoft could just phone it all in and try cashing out quick. It's a 50/50.