a pricecut with the Sony model might be a good choice in my opinion

Bayonetta 3! The Wonderful 102! Tokyo Mirage Sessions 2! Virtua Fighter 6! Any of those.

Don't forget that Microsoft isn't just the xbox brand. It's Windows, hololens, and a whole bunch of other tech I'm too lazy to mention.

Unless you're asking about their gaming division VS nintendo, I'm pretty sure they'll be much more valuable than nintendo.

Development costs for mobile games.

Let us keep all .downloadable nes/snes/N64 or any other games offered through the service, that would be sufficient for me.

price cut.
so more people buy the console, then more people subscribe, and more games would be sold. and the system get more games.
and maybe price continues to drop as long the number of subscribers rise.

They should invest it into R&D so they can make a console with enough power to get AAA 3rd party games.

Buy companies left right and centre. Make Capcom exclusive, moneyhat SEGA franchises, moneyhat Konami. $500m a year, considering how much they already can do a lot of things. Expand their development teams, stuff a price cut, flood the Switch with high-quality games and people will come.

Open a new 1st party studio

I'd be surprised if the service reaches 10 million subscribers, at least within the first few years. But they should use the money to improve their online services...