Hear me out, some won't like what I have to say but the reality is a hard lesson of life.

This is spoken as a business point of view, and not an emotional fan.

Now that the ABK deal has been blocked (For now) this puts massive pressure on MS and keeping Xbox Hardware relevant. Unlike Nintendo who sells hardware at a profit and obviously deliver lesser hardware overall to produce, and Sony can rely on CoD money pumping billions into PS without eating into their own revenue streams. MS have to continually eat the costs of its RnD, Hardware selling at a loss and also selling a lot less than the competition, losing them billions just to stay in it. Hardware is down 30% and Services is up by 10%. Even though the Series X/S is the fastest selling Xbox in history, its simply not enough for a company like MS.

Xbox hardware has always been a controversial product. Every Gen they come out and cannot make a big enough dent within the industry to maintain momentum. So the question is why does MS hang around in the hardware market? Is it to keep Sony in check? Thats not their responsibility and shouldn't have to bleed billions creating console hardware just to balance the industry out. This also falls on the individuals who disagree with that statement, if you cannot trust the company you invest in than you are investing in the wrong company. 

Alot of you will be saying "But but but if Xbox make good games they will sell more consoles" Wrong. Good 1st party games won't change the fate of Xbox. OG Xbox, 360, and the beginning of the X1 had plenty of 1st party outings and exclusives and it still hadn't gotten them close to market leader. What sells PS and XB is the plethora of 3rd party support, and that market has been taken by Sony long ago. Another example is the PS3, which had plenty of Sony's own 1st party support but the PS3 lost Sony $6billion while the 360 lost MS $4billion. 1st party outings did not change this outcome. Funny enough the X1 didn't lose the amount of money the 360 did and the X1 sold a lot less and with games releasing on PC regularly.

Sega lasted 4 generations before they dropped out, and this is Xboxes 4th generation and its hard to see them continuing the hardware front next gen. Due to the lack of 3rd party support and the ABK deal being blocked, MS will most likely finish this gen off and move to what Google tried to start with Stadia. The next Xbox won't be hardware like before but a service available on multiple devices saving billions on hardware and putting the Xbox eco-system on platforms to obtain their goal of subs.

This will make the PS fans happy as they don't have to worry about Xbox and will give Sony full control of the high end performance market, while most likely Xbox will be one of the larger publishers in the industry much like Sega today. 

The reality is the industry isn't big enough for 3 platform holders and it never works out well for the 3rd. History has proven that, dating back even before the NES and Sega years. This is why the Mobile market and PC market only have two main choices, ISO and Android to MAC and Windows. Duopolys seem to work more consistently.

I believe Xbox pulling out of the Hardware scene is great for everyone. Xbox will make more revenue with less cost, Sony can do what they want, and everyone will be able to play MS games across a much wider range of devices. In my opinion there won't be another traditional Xbox console after this gen with the exception of a hybrid system. If you are a collector, id start collecting.

Future may seem grim at first, but this is actually a win for everyone. More people playing video games is a better industry.

UPDATED: Xbox showed Paperwork to the FTC/CMA about their next console, and CMA labelled MS as a future monopoly in Cloud gaming. That is no coincidence.

This is a question that has routinely drawn a "no" answer since 22 years ago.

AAA third parties won't be happy though.

Nothing lasts forever. 22 years or 44 years, its inevitable if its not meant to be.

Also why would AAA third parties not be happy? Less hardware to developed on sounds like a positive.

Too many variables to say whether it would be a good move or not. There is certainly a possibility that MS could make more money than ever if they ditched their hardware business and started offering all their services and software on PlayStation and Nintendo as well. It would be easier to say if we knew what percentage of their contents and services revenue is coming from non-xbox platforms. The potential for growth by offering subscriptions and software on PlayStation and Nintendo consoles is massive, which is why they also expanded beyond their own platforms to Steam. Sony aren't going to turn down gamepass (at-least a 1st party only version) if MS is no longer a competitor.

MS are currently in a better position to move on from Xbox hardware than they ever have been before and software and services seems to be taking a much higher priority for them then their console platform but that doesn't mean it will happen. Their content and services is currently extremely healthy while their hardware last quarter took a big hit.

Interestingly if the Activision deal had been accepted by the CMA and it was pushed through then MS would likely have sold more 1st party software on PlayStation than Xbox this year.

Because Sony spends big bucks for the marketing rights of AAA third party games, and in a few cases for timed or outright (console) exclusivity. If Xbox didn't exist anymore, what motivation would Sony have to pay for games when the big third party publishers don't consider Nintendo an option anyway?

But AAA publishers aren't deserving of sympathy, I am merely saying that they'd wish for Xbox to remain a thing.

Thats not Microsofts problem. 3rd parties will always favor the market leader so that's on them in the end. 

If the ABK deal was successful, it would have bolstered more sales from the Xbox hardware as well, having a fighting chance to exist. Unfortunately that's not the case now.

Yes, we do.

Without Xbox controller, no dualshock and dualsense redesigns from Dualshock 3. Without Xbox Game Pass, no PS Extra (I don't count PS Premium, as it is mostly PS Now, which existed before). Nor even Nintendo Switch online retro games catalog.

During the late 80s/early 90s, it was Nintendo vs Sega and Atari (in the US), NEC (in Japan) trying to compete. During the 2000s, it was Sony vs Nintendo with Sega and then Microsoft trying to compete.

Competition is good for the market. And the current state of the market is very competitive.

Why do Sony keep making Xperia phones even if the whole market is basically around iPhones, Samsung phones and some chinese brands ? Because they want to have a presence in the market. And I'm glad they do, I always had Sony Ericsson phones (Sony only since 2011), their design philosophy is what I like about their phones. But they sell like 3 per quarter. And everybody gets inspired by Sony phones (waterproof phones, slow motion camera, fingerprint reader on the lock button, 21:9 aspect ration - mostly copied as 20:9 aspect ratio currently)

Less leverage.

Sounds like a Sony problem if they can't innovate. 

What happened to Sega, Atari and NEC?

Sony rely on Android OS. There is no 3rd Mobile OS.

Not Microsoft's problem. They aren't a charity just to level out the console industry.