If company A gives company B money for a game, how is that not investing in it's development?

Also I need to ask, but why do you think these companies are accepting money for exclusivity?

It is a good question.  I often wonder if square regrets timed exclusivity.  I feel like they do, but that is speculation.  Sales just aren't what I believe they should be.

Microsoft would demand parity on the Series S and it would be an extra hassle for SE. Plus, it would most likely go straight to Game Pass and they would have to negotiate a suitable compensation from Microsoft for all that, and maybe MS would not want to pay them as much as they would like and whatnot. When Sony offers them a deal, it must be fairly attractive comparatively.

To make a third party game across all consoles, you have to develop it for all consoles, which takes resources, which means your estimated revenue needs to overcome those expenses, for starters. But then you have to factor in possibilities of those developers working on something new and getting a better ROI with their time working on that.

For example:

If Team A makes Game A and releases it on console A, selling 6 million copies, and they project if they sold it on console B it would sell 2 million copies, but if they don't it would speed up development on their next game releasing on Console A by a year or two, which itself will sell another 6 million copies, then it may not be financially worth it to even bother with Console B.

If they have money to throw at a porting studio they could, but then that's once again money that could be invested in more *new* game development that has a better ROI. They could, instead of paying a porting studio money to port a game already made, invest that money in expanding their internal studios so they can push out more new games quicker.

I like exclusives. It gives each console a distinct flavor. If there were no exclusives, then you'd either end up with one console to rule them all (which would in turn, probably be very expensive due to it having a monopoly over the entire industry), or you'd have three bland, identity-less hunks of plastic. I would not like either scenario.

Your points are well-taken. In this case, that's Microsoft's fault in third-party support. Series S support is a bottleneck and not a good requirement from Microsoft. Additionally, it's also their fault if they pressure or require third-party publishers to have Day One Game Pass support. 

Square will have a reckoning at some point, either they embrace full multiplat or they live with the fact that they are crippling their IP potential and their budgets are going to have to be locked down to compensate for low sales.

No one else really cares about exclusivity anymore beyond that, not even the "Enix" side of Square-Enix, Dragon Quest has gone multiplat and zero chance in hell they are dumb enough to skip the Switch 2 for the next DQ game, it probably will be on XBox too.

There are plenty of 3rd party games that don't have exclusive deals. Thats how it should be. The developers have a better chance of selling more copies making more profit just as much as receiving a payout to keep games off other platforms. Its anti competitive when companies have to pay to stop games releasing. If console manufacturers want to compete for the customers money, do it via 1st party games. 

Because paying to keep games that already were giving budgets and in development to be made, is moneyhatting. 

I deleted everything that was irrelevant to the actual point.

On what's left, obviously developers disagree with you, or they would not be making these deals. They may not always be right, but I'm definitely going to take their word over yours on what is profitable.

That being said, it would be trivially easy to ensure that the deal works out for the third party developer. You can make the amount paid for exclusivity dependent on the amount sold on the platform it does release on. Take FFXVI for instance. Square has released other FF games and similar games on both Sony and Microsoft consoles and can reasonably estimate the sales breakdown between the two sales. For instance they can estimate that sales on XBox for FFXVI would be about 30% on XBox than they would be on PS5. So, you arrange that the fee for exclusivity would be somewhere around 30% of the profits generated by FFXVI on the PS5 (adjusting for things like lowered development costs for developing on one platform) and voila. Square is basically guaranteed not lose money.

Alternatively, you can make the exclusivity conditional. The game will be exclusive assuming it sells at least X million copies by 20XX. And if not, they are free to release it on another platform. This again allows the dev to essentially guarantee the deal works out for them. Again, you would have to account for things such as the decreased sales that will come from launching the game later, and so on.

And of course, profitability is not the end all be all. Companies often are willing to sacrifice potential profits for the sake of mitigating risks. That's basically the whole point of investing. 

There are tons of ways you can potentially arrange things, and it would be silly to analyze each of these hypothetical arrangements. The obvious conclusion though is this. If exclusivity agreements were not beneficial for third party developers they wouldn't exist. 

This thread is just an example of backwards reasoning (or just making intentionally bad arguments for engagement). You don't like third party exclusives, and you're entitled to that opinion, and are trying to come up with reasons it is bad after the fact.