I am sure the executives and leadership of the most valuable publicly traded company in the history of capitalism are tearing their hair out in desperation. A lot of these console war discussions seem to come from either people who fail to see where the industry is going or think that Microsoft is SEGA and this is 1997.
Microsoft's market cap is 2.9 trillion - if current trends continue and its stock price grows in 2024-2028 at the same pace it grew from 2020 to 2024 (an unlikely, but not impossible development), Microsoft's market cap will be larger than the entire gross domestic product of Japan, where both Sony and Nintendo are headquartered and where both are key tickers in the NIKKEI. GDP to Market Cap is a stupid comparison, but it shows how many orders of magnitude separate say, Sony, from Microsoft.
With cloud exploding and the SaaS model becoming the way of selling electronic products, how many more consoles can we expect to have in front of us before the industry drops the practice of selling devices entirely? Two, perhaps three?
Sony's online infrastructure runs on Azure. Nintendo's game streaming services in Japan? Azure. These companies develop their games on Microsoft software (OS), host their content on Microsoft infrastructure, write their contracts on Microsoft word processors and Nintendo at least manages their digital assets using another Microsoft product. And none of these products are sold under perpetual licenses, it's all subscription, all the time.
Far from being the "downfall" of Xbox, Game Pass is a portend of how things will come to be. As Cloud increasingly becomes a duopoly (AWS/Azure), and Microsoft is the only major cloud provider with extensive experience dealing with electronic entertainment, it is not a stretch to imagine that in 2040 over 90% of all gaming will take place within the Azure public cloud.
It's not that Xbox is going "third party", everybody is, sooner rather than later. And guess who will be running the infrastructure?
I am writing this from my personal machine running Fedora 39 and I absolutely hate what modern gaming has become, but the writing is on the wall. We won’t own games, we will pay the major publishers for the right to play them, for a fee. Single player experiences will become a niche thing, most games will be service games. Hardware will be a “controller” connected directly to cloud to avoid latency and “consoles” will be replaced by apps on smart devices. All will require a subscription to play, some, like Nintendo, will likely charge extra on top for their flagship titles.
And every extra hour you spend building some crazy gadget on Zelda: Tears of Whatever XI, Microsoft will make money.