That's very naive.

Of course they would have to expand virtual machines for tens of millions additional xCloud users. Every Teraflop they have to calculate for the additional xCloud-needs they can't calculate at the same time for other customers.

Other customers who pay a "little bit" more for their virtual machines than $15 per month: https://azureprice.net/?_memoryInMB_min=16

And every additional teraflop Microsoft calculates "in the cloud" produces costs for them (more energy, more cooling, more servers, perhaps even additional lots and buildings for expansion of the new servers...)

Yes you are right, there is a huge difference between only making hardware for MS server farms which is comprised for XCloud with Series X and making it to sell to customers.  The same R/D you mentioned still has to happen, no matter if you building it for the server farm or you are building it for customers.  There is a big difference you seem to be missing.  When MS sells to the customers they recoup that cost with game sells and services.  MS cannot recoup that cost if that same hardware is running in a server farm.  This in big business would be considered a loss for each piece of hardware added to the server farm.  So how many subs would it take to overcome that lose.  This would mean MS would be reliant for all their revenue from XCloud which as we have stated is no where close to being a viable solution over local hardware.  So now MS would lose all the revenue as we stated again from their services running on local hardware.  You lose all your sales from games being sold and played on your local hardware, you lose license fees for every game that is sold on your local hardware.  

It really appears you do not fully grasp the business model.  GP cannot survive on XCloud alone, it would not work.  MS would bleed money and the games division would be operating in the red for years if not longer.  How many subs would it take to not only over come all the lost revenue we have talked about before but also lose revenue in all the studios making games.  Those are also cost you have to consider as well because its not cheap making AAA games and if MS is purchasing more studios and publishers to make GP a service that has first party content every quarter then how much of a cost is that to the gaming division.

So if MS is losing 200 per console, how much are they losing per server farm without selling to consumers.  How do MS continue to sell their services on top of hardware and fund game development and the cost of upgrading that hardware cycle.  Nothing that you have stated comes close to making that a reality.  50 million subs is not going to cut it, it would take something north of 150 million which MS is no where close to accomplishing. 

I am sure they can recoup that. Currently GP is earning them billions so this doesn't seem like an issue.

Than why cant they go the Steam route? Just offer GP as a digital store front? 

GP is already proven to be earning billions so the costs will be covered with the loss on console hardware.

Even Phil said he doesn't see the need for mid gen hardware, its simply not worth the investment anymore.

Yeah, they are going from one competitive situation to another.  Now instead of cooperating with Steam, they would be another direct competitor.  You your self just pretty much argued against that but now you are supporting it as long as its MS, that doesn't make sense. 

Yeah, GP makes billions but that's because it has HARDWARE to run on.  You are still trying to convince everyone that consumers will want GP without hardware.  You are also trying to convince everyone without hardware, MS can sell GP against Valve Steam and developers and publishers will be flocking in droves to put their games on GP without hardware.  MS on the PC already have a storefront.  MS on PC already offer GP.  How is MS going to get console users to buy into GP without hardware.  Now we go back to the same situation again.  MS would need to rely on putting their service on Sony and Nintendo console which is a direct competition with their services.  You want us to believe that Sony and Nintendo will say yes if MS leave the hardware market when they are not willing to say yes today.  That is a hard sell

Do you forget that GP is a games download service first and foremost.  What you have not provided is why someone will get GP without hardware.  Why would they today or even in the near future want to only be able to play their games over XCloud.  We have an interview with Phil today talking about Cloud and he pretty much stated exactly what we have noticed about the service.  Its not close to being ready and more of another way to play your game when you are out and about.  He doesn't even mention it as the main focus point for the business which is another point in how MS view it.  Its still in beta, you never hear any updates on it expansion or pretty much anything.  XCloud will as we have noticed will be just another add on service geared to give gamers more options to play their game but never the main focus.

Last but not least, no one see a reason for mid gen hardware.  That is not him saying he doesn't see a need for console hardware which is something totally different.  The only reason you would do a mid gen is that at this time or next year, you can drop the price of your main console and bring out a new one that is so much more powerful then your current system to make a huge dent in sales as well as games.  

Here is that interview from Phil.

https://www.youtube.com/watch?v=RcMoi1wNagA&ab_channel=BloombergTechnology

Keep in mind, i am not talking about now. I am talking about the future. Next gen maybe the gen after. Its going to get to a point that people wont need dedicated hardware to play the games they want. 

Sony and Nintendo can say no to GP, they can lose their cut on Halo and Elder Scrolls 6 etc if thats what the shareholders want. If MS gain ABK, they can also lose their cut on CoD too. Thats on them.

MS focus on hardware is not their focus anymore. Sure their consoles are built amazing but majority of the world simply dont care for it. 

MS compete with Steam while currently using Steam to sell their games. I am not sure where you think i contradicted myself here. That was always the case. 

Next 5 to 10 years, GP will be available on alot of devices where majority of the new gen wont have to worry about purchasing expensive dedicates hardware. Thats my point. Mum will say, you dont need an Xbox, you have one at home.

Sony and Nintendo already lose their cut of Halo and Elder Scrolls, from what I have seen from both of them, they are not hurting.  Not only are they not hurting but their own IP seem to be doing extreamly well.  Then when we look at being the only 2 consoles on the market, that means they even get more developer support on their platform increasing their cash flow and expanding their services.  GP would be regulated to PC maybe mobile but without hardware, why would anyone put their games on GP when they can put their games on PS+ and Nintendo Online services.  Yeah, I am not seeing Sony or Nintendo caring not having MS games as they do not care today about not having MS games.

MS still need to focus on hardware. You continue to ignore this point.  Series X runs XCloud, what will be running XCloud in the future???

MS had to sell their games on Steam because the MS store sucks.  If MS did not sell on Steam, MS would be doing terrible on PC.  MS is more dependent on Steam selling their games than anything else.  What you stated before is that MS would try to directly compete against Steam in a way that would put them at odds with valve which would probably not be in MS best interest if they have no hardware. If MS is dependent on Steam today for PC sales just think how much dependent they would be when they leave the console space.

GP is already available on a lot of devices.  I can today, access GP on my Android phone, my IPAD pro, my PC and my Xbox.  

Anyway, I believe we have exhausted this topic as we are just rehashing the same points.  I will leave it with what Phil stated is their focus which is console, PC and mobile.  When you show Phil changing that focus to XCloud then we can revisit but until then, MS isn't leaving the hardware market nor can they afford to do so.

Okay before you go, accouple things. 

First, this isnt about Sony and Nintendo doing well without MS games, its always about doing better with Corparate mentality. If their is revenue to gain with GP, its on the minds of shareholders etc.

Second, MS compete with Steam the same way MS compete with Playstation. Steam has no issue selling MS games on its Storefront considering MS are a direct competitor to Steam at the same time. No different to Sony and Nintendo. So again why would Sony and Nintendo say no to free revenue gain? Steam also has no issues for GP running on Steamdeck either. So again, why would others say no?

Third, GP can sell on its own with its own 1st party outings. Why do you think MS want to release 4 AAA games a year? To drive GP subscribers. In the coming years, GP will have plenty of 1st party titles, big and small to offer its customers. MS own some of the biggest franchises in the industry that gamers arent going to ignore, especially Sony and Nintendo when they see a protential boost in furthering sales. ABK will only support this fact.

Casuals will flock to GP to play CoD and that might be the only way Sony can gain CoD in the future, but based on what your saying, they are comfortable, they dont care if they lose out on CoD billions because they are doing just fine. I dont believe thats how the industry works.

Okay before you go, accouple things. 

First, this isnt about Sony and Nintendo doing well without MS games, its always about doing better with Corparate mentality. If their is revenue to gain with GP, its on the minds of shareholders etc.

Sony and Nintendo are in direct competition with MS.  While they would allow MS to publish their games on their system, there is no scenerio I see where they would allow GP on their hardware, especially Sony.  Both Sony and Nintendo would get even more games and sells on their platform if MS leave the hardware space.  Both companies sales would increase 2 to 3 folds, so no, neither one needs MS games and they especially do not need GP.

Second, MS compete with Steam the same way MS compete with Playstation. Steam has no issue selling MS games on its Storefront considering MS are a direct competitor to Steam at the same time. No different to Sony and Nintendo. So again why would Sony and Nintendo say no to free revenue gain? Steam also has no issues for GP running on Steamdeck either. So again, why would others say no?

We are talking about GP.  So lets keep it there.  Steam does not have a GP service, Steam is basically a storefront not a console platform.  Either way I agree that neither Sony or Nintendo will not be against MS selling their games on their platform but you are going to have to give me a good reason why they would accept GP.  PS+ is exactly like GP, MS and Sony fight for the same games on their service, why would Sony allow GP on the Sony console? 

Third, GP can sell on its own with its own 1st party outings. Why do you think MS want to release 4 AAA games a year? To drive GP subscribers. In the coming years, GP will have plenty of 1st party titles, big and small to offer its customers. MS own some of the biggest franchises in the industry that gamers arent going to ignore, especially Sony and Nintendo when they see a protential boost in furthering sales. ABK will only support this fact.

Well its no point in arguing this, if GP can sell on its own, why is it not selling like gang busters on PC.  Hell, why its not selling like gang busters on MS own hardware.  Its not about releasing AAA games that will push GP, its selling games that entice customers to want the service.  AAA is just a label until the actual games come out and are must have.  Sony have must have IP, we are yet to see if MS have must have IP.  While the growth of GP seems to be ok, its not growing at a number that suggest without hardware, all those Xbox GP subs will stay. My perdiction would be that at least half would leave and that would include myself.

Casuals will flock to GP to play CoD and that might be the only way Sony can gain CoD in the future, but based on what your saying, they are comfortable, they dont care if they lose out on CoD billions because they are doing just fine. I dont believe thats how the industry works.

Casuals isn't flocking to GP now.  I would not put to much hope in ABK just yet but if MS does pull out a win which mind you is slim at best, ABK would help MS in the long run but even still, there is no casual I know that plays COD that is willing to play that competitive game over the Cloud.  By the time cloud infrastructure is at a level where that can be done as I stated, all the OEMs would be using Cloud.  Last but not least, even if MS get COD, they would lose a hell of a lot of money excluding COD from Sony systems but then again as I have seen in this industry, when one game goes away, another will fill in the space.