I have read your post. You can disguise what you are saying all you want. You mention competition and Xboxs direct competitor in the hardware market is PS. What else do you mean by competition in the console space? Neo Geo?

If you don't trust Xbox great, then you are okay with seeing them exit the console hardware, it doesn't affect you. Sony will look after you.  

Its not up to MS to bleed billions just to keep Sony from stuffing up. MS investors are seeing this and its literally dumb to be in the console market when they can sell more software on other hardware.  

If you don't like Xbox and its games than you lose nothing. This is the reason they will pull and just focus on releasing games as a publisher.

Ill say it again, its not up to MS to bleed billions to keep Sony in check. Someone else can enter the market and do that. 

Many can argue back with all your claims. When was the last time Sony made a Racer like Forza Horizon? A 2D Side Scroller like Ori, a good FPS game? Infact when did they make a good MP game? How long back do we have to look?

Sorry to say, XBox isnt going anywhere, they will continue to make games because that's where the money is. They will just not lose billions on making hardware. 

This.

The question in the title asks do "we", presumably being gamers, need Microsoft. People respond with the benefits that Microsoft being in the industry has for gamers. Then they are told that Microsoft shouldn't care about any of those things.

You have conflated two questions.

1) Do gamers benefit from Microsoft being in the industry?
2) Should Microsoft, in its own best interest, stay in the gaming industry?

And when people answer the first one, you criticize them for not answering the second. Kind of unfair. And I don't think reading the OP would really help clarify that.

So, to answer them separately.

1) Yes. Competition, generally, is good for the industry. Microsoft funding Halo led to kind of an explosion in first person shooters, with GOW doing the same for third. Microsoft's XBox Live pushed Sony to better their online service, and Gamepass pushed Sony to offer a similar service which I think is a pretty good one.

2) That's really up to Microsoft. I think they see their presence in the console space as a means of getting more people into their services. For instance, get people playing on XBox Live, and even if they don't stick with consoles, they might keep on in that ecosystem. Or get them started on Gamepass and even if they don't continue on console, they will follow the service to where it goes next. For something like Gamepass, a large part of the potential market is on consoles, and I don't think that kind of product can be successful without a console presence, at least for now.

Whatever the case may be, it seems Microsoft thinks it's worth investing in. I would say that their internal teams have more data on this than you or me, so I would generally defer to them. They see a benefit here either because their current level of success is good enough to make profits in the console space, or because it leads to greater profits elsewhere.

So, that's an answer to the two separate questions you are actually asking.

Okay, I'm confused. I thought the whole point about stopping the ABK deal is because having a "monopoly" would be bad for the industry and for gamers?

Who says anyone else would automatically enter the market? No one can be in this business unless they are willing to spend a few billion dollars that's just the reality of the market. 

You assume if Microsoft leaves that it's gaurunteed someone else would enter to ensure there is direct competition for Sony. I don't think that's a given at all, your whole premise even betrays that point ... who is itching to get into the industry knowing that it was bleeding MS for a bunch of a cash too. That's not very appealing for anyone. 

We just saw Google fail to enter the market. Apple failed to enter console gaming. It's not as easy as just hey we have money to make a console. Phillips & Panasonic were big Electronics companies once and they failed the console market. You also have to know the market and have the right timing. Had Sony tried in 1991 they likely flop. Sony worked with Nintendo and SEGA and learned the market plus the benefit of Nintendo and SEGA tripping over themselves in the 32-bit era. MS at least had worked with PC gaming in the 90s and worked with SEGA 90s as well. Even pre Dreamcast. MS used Dreamcast in focus test groups when developing Xbox. Nearly had a VMU and BC with DC games. The console market has proven difficult to get into and even more difficult to even have success. It's a much more exclusive market than PCs or TVs.

you didn't read that the second part of what I wrote. I'll summarize:

Microsoft needs to prove that the Xbox is a platform of equal or greater value than Playstation/Nintendo, otherwise it will always be at a disadvantage. They will not be able to do this by being a third party, on the contrary, if they distribute games through the Playstation/Nintendo they will only contribute to strengthening the fame, reputation and mindshare of rivals in detriment of the Xbox brand.
In the "future" where Cloud Gaming is the main form of distribution, Google, Amazon (or other big tech) can partner/buy Playstation or Nintendo and surpass a "Weak Xbox". Microsoft shouldn't take that risk, they need to strengthen the Xbox brand and make it stand out, leaving the console business as a "loser" is a mistake.

So yeah.... putting PS in check, and making Xbox strong is MS's problem.

Lets also have some perspective here

Microsoft: 2.3 trillion market cap (company value)

Amount MS was willing to pay for Activision: Just shy of 70 billion

Sony Corp market (entire company): 118 billion

Microsoft can more than afford to waste even billions of dollars on gaming if they want. They are 20x bigger than Sony is and were willing to spend 70 billion on Activision alone, that's almost the entire worth of the Sony Corporation.

Yet they never won a console generation.  The one with the least amount of cash is beating both of them.