My thoughts.
1) Perhaps they've realized that their is a market for games with actual art styles rather than realism. Nintendo scores tons of money from this market. Why can't Microsoft?
2) just because something is cartoony doesn't mean it won't be graphically breathtaking with CGI and cinematics. Everwild and the bugs life game look utterly amazing!
3) Even if they are lower budget than ps games, maybe they are holding off on their bigger guns until their next device so it can stand against the ps5.







