The thing about the Xbox ecosystem is that... It's more than just hardware. It's more than just the consumer-facing side of the business.
Microsoft does not need to sell 50-60+ million hardware units to be a success.

It's an ecosystem.

That means if a developer makes and releases a game on Xbox, chances are they are using Microsoft's Azure and Microsoft's Content Delivery Network (CDN).
Chances are they are porting that over to PC, continuing to keep Windows marketshare relevant.

Chances are they are buying into Microsoft's development tools and support networks.

Xbox is NOT just the Gamepass subscription or boxed copy sale.

And that is why Microsoft is valued at $3 trillion dollars, because all of Microsoft's businesses support and leverage each other to drive revenue and profits.

Yeah it doesn't matter if you have the best hardware on the market, if you don't have the games to back it up, you'll struggle to sell.
Xbox Series has basically stalled in sales and is too far gone to salvage at this point, but Nintendo has proven multiple times that a generational reset can reverse a brand's fortunes. But that can only happen if they fix the underlying issues, like Switch did.
If they got into Xbox 5 with the same lacklustre first party output, it will flop.

As far as popularity, they can't possibly have a lackluster output now that they own ABK. They're comfortably the biggest publisher/developer in the market, and the odds are they will be acquiring more companies.

The problem is their exclusive strategy or lack thereof. People will gravitate towards PC or Playstation as long as they keep getting CoD, Diablo, TES, etc. Not even GamePass day 1 inclusion is gonna change that. Xbox just lacks identity.

They used to have an identity, they were the rugged hardcore machine that had all the coolest shooters. 

Now they're just a PS5 with no exclusives.

If all their games end up coming to other consoles then they're basically doomed and living on borrowed time. There's just no real reason right now to buy their hardware.

I owned an original Xbox back in the day, the 360 is one of my favourite consoles of all time, and for years I've been planning to get a Series X when Hellblade II arrives as the first game was one of my top games of the 8th gen, but the way things are going I feel like I'd be better of just waiting for it come out for my PS5 and in future my Switch 2.

I bought a Series X last week and I'm just playing Gears/Sunset/Rare Replay and Crackdown 3. I got all of those games super cheap brand new. Had fun but if I paid full price for all that I'd be soured. Figured it's better to get a new SX than try and hunt down an Xbox One X. My PS5 tho I have 50 plus physical games and Switcn 150 plus. I will get Space Marine II on SX to have at least 1 new SX game and maybe a Gears 6 in the future. Other than that I have an overpowered Xbox One. Some features I like better than on PS5 but some on PS5 I like better. It's a good box but yeah for SX stuff. Not anything worth playing.

For me both the Xbox and ps5 haveast their identity. Both feel like a low end PC with less games. I never expected both MS and Sony to go full PC with their games. But here we are.  

Yeah gotta be honest, while my PS5 is fine for checking out the bigger stuff that doesn't make it to Switch, it does feel like all the personality and cool exclusives Sony used to have back on the PS1, PS2, and PS3 has been purged in favour of being as generic and inoffensive as possible.

Full exclusivity no longer make sense for 3rd party developers. Porting is much easier and less expensive than before, and you have two platforms that are around as massive or bigger than Playsation. Timed exclusivity on the other hand does make a lot of sense. Full exclusivity for a platform holder, which only Nintendo does these days, is also logical.

The difference between Playstation and Xbox is that one is slowly and only partly losing its identity (and bolstering PC), and the other already did many years ago. The real winner here is Valve.

Microsoft can easily make Xbox very relevant again, but it would come at the great price of damaging their IP's including CoD. MS is only the biggest publisher out there because they're a multi platform company. If they return to full Xbox exclusivity, Nintendo would probably beat them, and Sony too might.

I don't think timed exclusivity will be enough to compel many people to buy a console; if they know the games will eventually come to PS5, they'll buy that instead.

Releasing on PC is fine, some folks just prefer consoles and will never become PC gamers, the problem is that if you're in the market for a console there's little reason to choose Xbox any more.

Timed exclusivity against PC also makes sense for both the platform holder and the 3rd party publisher. If Sony starts mimicking Microsoft's PC support and release all their games day 1 on PC, PS5's sales would definitely decline just like Xbox One and Series XS.

It's true that "some" folks won't leave consoles anytime soon. But PC does appeal to a lot console gamers. There are millions of PC gamers who switched from consoles. Sony's PC support is slightly accelerating this, and a day and date support would accelerate it further. Nintendo refuses to support PC because they know it would hurt their console sales too. Modern PC is just too similar to modern consoles.