Do they need to beat Sony's conference or beat Sony's console? Those are two very different questions. For the past couple of years I've been hearing Microsoft had the best show at E3. Meanwhile their console sales are in the toilet. Microsoft is really good at being "showy". They figure out tricks like showing off a bunch of third party games first even though those same games are going to also be on Playstation. So people say that have the best show and then turn around and buy a Playstation anyway.
The #1 thing a company can do to make their system successful is have great exclusive games. For Microsoft this would be even better if they have exclusives that really show of their hardware capabilities and are also available in the first 12 months after launch including a launch exclusive that is at least as good as Spider-Man. I think Sony has the long term advantage in game development with their SSD, but it's also going to be a few years before we really start seeing games that make full use of it's capabilities. That means Microsoft has the advantage in the short term because their system is technically more powerful. They need games (ideally really fun games) that show that off.
Here are some other things that will put Microsoft on top. If they did all of the things I'm suggesting they could launch with price parity and still crush Sony.
1) Leverage Minecraft to keep people from PS5. They could say, "We are promoting cross-play with all of our platform partners." Who would be their partners? Series X, PC, Switch, and Mobile. Everything but PS5. On top of that they need to update the console versions of Minecraft to include the most popular mods from the PC.
2) Have Rockstar come out and announce GTA6 as a timed exclusive. It will come to Series X one year before PS5.
3) Keep having a steady stream of exclusive games. This is especially true for the first couple of years. Eventually enough third party games will release, and that will be the main driver of sales, but in the first couple of years they can really distinguish themselves from Sony with exclusive content.
If they did everything I suggested, then they would crush Sony in Generation 9. If they only do some of the things then they'd be competitve, assuming price parity. On the other hand if their conference mostly shows a lot of third party games and maybe just a couple of exclusives, most games don't have a soon release date, and they've got nothing at launch that can compete with Spider-Man, then Sony is going to hand their ass to them again.