> If Microsoft could have a large piece of the console market, they would have taken it, corporate strategy be damned. Whatever got them into the market (and you're right, they did it as a long term power play for the living room) doesn't mean Microsoft has some kind of purity of vision or grand unchangable plan, their corporate culture is notoriously factional and fragmented. They aren't a hardware company... until they are

You’re making a hypothetical point here though. And not only hypothetical, but one that flys directly against all of the actual behavioural evidence we do already have.

> There are risks to giving it up too. Make the Xbox open and Steam could potentially gobble up what's left of a la carte game distribution on PC. Xbox Live is inevitably going to die, why pay for online services when every other store offers them for free? All that's left is Game Pass, but the long term viability of subscription models for games is shaky, they're getting more subscribers but they aren't hitting their target numbers and they need to scale for it to be able to turn a profit.

You’re completely missing the point of what Xbox Live is here. It’s not just support for online play, it’s “free” AAA games and game streaming. It’s Steam, Google Strava and PlayStation Plus all rolled into one. It works on PCs, tablets and even Meta Quests too.

That’s why MS are buying studios and why the Xbox is less relevant. Hardware becomes irrelevant if you’re streaming the games to customers.

It also got a massive user base already. In fact they’re the leading online gaming service provider. And if you read any of the market analysis for this online gaming services, streaming and gaming from non-traditional gaming hardware (eg portable devices and XR headsets), those markets are set to explode in popularity over the next 10 years.

Apple knows this too, which is why they have Apple Arcade. But Apple are focused on hardware lock-ins while Microsoft are focused on software dominance.

> There's the cloud and they're in a great position to compete there, but I remain unconvinced that it's good enough.

They already dominate there ;)

> It's less a primary way to play games and more a value-add, most people, even casuals, seem to treat it as such. And what about them owning the software layer? They don't even have a monopoly on running Windows software anymore, at least in the domain of games. I suspect this might be a problem for them down the track.

Competing for operating system dominance is a thing of the past. Outside of server licensing, no one charges for desktop operating systems any more and mobile operating systems have always been a free bundle. Plus with more and more applications being web-based, half the time the “operating system” is just a web browser.

Microsoft knows this, which is why Edge is based on Chromium and why Windows 11 is a free upgrade.

These days real revenue is generated from subscription based services. Hence the Office 365 and the Azura AD examples I gave. Hence why Apple are moving into subscription services. Hence why Adobe products are now subscription based. Whereas what you’re describing is the industry 10+ years ago.

> The way I buy their games is as Microsoft only as publisher, since I buy them on Steam. I play them on my Linux PC. In a way, they're already Sega post-Dreamcast.

That explains why you have very little understanding of Xbox Live and Microsoft’s pitch for subscription based gaming services. :) I don’t mean that in a negative way, just that you haven’t really explored cloud gaming yet so haven’t been exposed to just how large that market already it.

Personally I much prefer your way of gaming too, albeit I’d almost always opt for physical copies if any exist. I’m definitely and old school gamer. So I can’t say I relish this new future where you don’t own the title you play. But like it or not, that’s where the industry is going.

Have a read about some market analysis for online gaming services and popularity of gaming platforms. Quite a lot of them are going to be industry-aimed and thus not free to read but there’s enough resources out there that you should get an idea of what I’m talking about. The whole console industry is on a verge of a significant shift. It’s like the shift from cartridge to optical disc. Or from single use circuit controlled games to ROM cartridges.