Its not just Steam, its a combination of many things. Steam is a major player in the gaming industry which has a massive market. The bigger the audience the bigger the potential of sales. Xbox is also focusing on Xcloud and GP on universal devices which only adds to the audience. If Xbox was solely a console brand, they wouldn't have anywhere near the potential sales for their software. Xbox's direction is clearly going into the way of the App, and i reckon after next gen, that's what we will have, just a Xbox App on multi devices.

https://www.vg247.com/2020/04/30/xbox-live-user-numbers-2020/#:~:text=Animal%20Crossing-,Xbox%20Live%20has%2090%20million%20monthly%20users,hundreds%20of%20thousands%20testing%20xCloud&text=Microsoft%20recently%20revealed%20Xbox%20Live,almost%2090%20million%20monthly%20players.

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SAN MATEO, Calif., January 6, 2020 - Following another year of successful holiday sales, Sony Interactive Entertainment (SIE) today announced that PlayStation™Network’s (PSN) December 2019 monthly active users have reached 103 million^*1, demonstrating that gamers worldwide are enjoying PlayStation®’s offerings. Additionally, the PlayStation®4 (PS4™) console has sold through more than 106 million^*2 globally, and the cumulative sales of PS4 software titles from retailers and PlayStation™Store (PS™Store) have reached 1.15 billion^*3 as of December 31, 2019.

Both numbers can be miss leading because active users do not really mean paying users. Sony playing hardball with only supporting PS5 at the start of next-generation might hurt their subscription numbers compare to Microsoft who's expected to actually grow the numbers of subscriptions with Adding Xcloud and supporting the older consoles for the next two years.

I still don't quite understand why are you stating this as a fact when there is clearly no evidence that this is a case. I mean I get that the audience is bigger potentially in this case but does it result in bigger revenue? What do you think would be better:

a) If MS sells 70-80m consoles and all this 70-80m people are buying through their store which brings an enormous revenue. VGC has Xbox One software attach ratio at around 6 games. But considering that the digital purchase share is a bit higher than 50% right now, that's would bring us at around 12-13 games per console and probably 1b software sales in 6-7 years.

b) MS sells 30-40m consoles but sells their own games on Steam. This will result in a loss of half a billion software sales on their platform in return of let's say having an audience of 100m people who can buy their games from them. 

So, do you think that an ability to reach 100m of additional customers just for first party games worth the trade off of 40m customers who are locked in to your storefront completely? I personally don't think so.

Its why they have options, Xbox still has an audience, but to MS, there is a reason why they are focusing on GP and multi-plat releases to Steam etc as it covers more grounds to grow. They aren't pushing people to buy a Series X at launch hence the cross release games. I haven't done the research MS has done but there actions are clearly showing that the console sales isn't enough and they want more. 360 sold 85m consoles and 1b software and yet it still lost money in the long run and was only saved by its subscription model. XB1 sold 50m consoles, its probably more profitable than the 360 however still isn't satisfying for a major corp like MS. So Hardware isn't the answer for them. Weather they become bigger than PS isn't the idea, its finding a model that suits there vision and needs. If they wanted to compete with PS head on than they wouldn't be doing this PC and GP thing. 

I think the Halo Infinite graphical backlash is entirely dumb. If the game is amazing, story appealing and you having a blast playing; then I can forgive a few pop-in and not having the best grass graphic in the industry. Moving to open world and having to locked 60 FPS is key to Halo infinite and if the price is slightly downgraded graphic, I'll take that trade-off. The community obsession with Graphic is why we don't get more games with locked at 60 FPS. Assassin Creed Valhalla should be locked 60 fps but Ubisoft knows that the general public is graphic snobs and will always push for a higher graphic fidelity with a slower frame rate because that is what sells more games.

The best game I've played last generation is Zelda: Breath of the Wild this game alone throws all the graphics snob argument out the door. Halo Infinite is going to be an amazing experience. I think 343 is constantly going to be working on the graphic, so eventually, Xbox series X will deliver the polish the general public expected on Day 1. But, regardless I think playing is believing... I love the direction that 343 took with Halo Infinite. I just replayed all the old Halo games, the last one being Halo ODST, boy does this have me excited for the possibilities of an open world Halo game. 

The main argument against getting an Xbox Series X over a PS5 is that game will be held back and it won't take full advantage of next-gen graphic. But, I look forward to playing with my nephews and two of them are still rocking the OG Xbox one and Xbox one S. Also, once I upgrade to Series X, I'm happy knowing that they will still get lots of mileage out of my Xbox one X. Ps5 locked ecosystem is the main reason I intend to wait a few years before ever considering picking one up. This is a complete reversal of 2013, were Sony mocked Xbox for how to share games.  

It lost money mostly due to RROD on X360 and they decided to go different revenue stream because they can`t compete on console against Sony.

Xbox did compete with PS head on. They did it last gen and beat Sony at their own game, so they can do it. However the cost of doing it doesn't fit well with a mega corp like MS. 

RROD lost $1.5b for the 360, the total loss was $3b so RROD wasn't the main issue. The PS3 lost $5b and that's without an RROD issue and paid subs to help balance it out back than. The collateral damage isn't worth it so that's why they changed Xbox the following gen with the XB1.

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They tried a very good move, but RROD made them waste XB's head start. Sony messed up too with costs and price and Ninty won with Wii, beating both easily.

Those numbers show RROD wasn't the only issue, at least financially, but unless there were just another issue, RROD still had to be the main one, as it totalled 50% of the losses alone, leaving 50% to be divided amongst all the other issues. If you mean it wasn't the main one for damage different from the direct financial one, that's possible, but I remember RROD problem was particularly serious, right at the beginning, so if it was solved later, with totally redesigned mobos and cooler chips, it surely was the main culprit for ruining XB360 head start. Sure later in the lifecycle RROD became just a bad image problem from the past and other issues could have become bigger, but in the first years RROD was really the most horrible problem, scratched discs for example was much easier and less expensive to solve (slim optical readers with stiff enough mechanics existed since the first portable CD player was produced).