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barneystinson69 said:

 this is chopping fat.

Don't cut the fat off if you don't have any meat to spare.

With the anemic first party line-up, Microsoft should be massaging every nook and cranny of those small studio's in an effort to create a decent midsize studio out of them. It would be difficult but the alternative is the harder alternative of creating a studio ex nihilo---even buying developers is a very risky effort.

Think of Nintendo, to pad the Wii U's library they've spend quite some resources on low-cost, low risk projects mostly by repurposing content from big projects (e.g. captain Toad). It's definitely helped create variety.

Meanwhile it's quite telling Redmond was willing to pour money these past years into creating Hololens and Kinect developers, yet after the supposed strategy shift there has been no resources dedicated on more traditional indie, midsize or AAA tier first party.