I always argue and still firmly believe that the woes Xbox hardware is facing comes from marketing and messaging and how Xbox presents itself as a brand.
On paper Xbox should be leading the charge in console sales this generation. I do not think that means stealing consumers from Nintendo or Playstation because the console userbases seem pretty set (both in terms of digital library and where they are happy playing); I mean that Xbox should have seen a surge of brand new consumers in the console market. There are a lot of reasons why Xbox should've helped bring console gaming into the zeitgeist this generation including its massive "play anywhere" ecosystem. To most of the world, owning solid hardware that can play games seamlessly between said hardware (console), PC, and Cloud isn't a downside in proposition. People forget that PS Now offered PS gamers cloud gaming on Sony TVs and PC in addition to PS4 consoles before Xbox Game Pass was even a subscription service on Xbox. I was specifically a teenager who convinced his family to buy a Sony TV for that singular reason. PS Now was just such a bad experience and overpriced service that Sony tried to disassociate with it as much as possible until they killed the name entirely. Now Xbox DID NOT start this generation with a good showing for their PC and Cloud experiences (and both still aren't to snuff), but it still remains that Xbox currently offers new consumers a level of value and control over their gaming experience and overall ecosystem that isn't matched by any other console.
A different more aggressive Xbox marketing strategy this generation would hammer their console competitors for not offering free cloud saves, a feature that is standard on PC and even has some publishers like Ubisoft take it into their own hands to have free cross platform cloud saves. At the same time Xbox could hammer home how they are the only console to offer free cloud saves which encompasses Xbox Play Anywhere games on PC and any GPU games played on the cloud. A different Xbox marketing strategy could focus on the Xbox Series S's size and low price point makes it the perfect entry level gaming console. I think the Xbox One marketing traumatized them, because the Series S would be perfect to market to families who want a "home entertainment box". It's crazy how much the Xbox One dropped the ball, because now every console just has all the streaming apps and your near entire digital movie library just follows you with Movies Anywhere. The Series S as Xbox's smallest console with a starting price as low as the original Xbox (without inflation) that frequently dropped to $200 and could both play all new games and games across the 3 previous Xbox generations and had access to all the movies and TV one could ask for, should've taken the world by storm. To it's credit it started to sound like it would as the Series S led this Xbox gen as the fastest selling consoles on the market and Microsoft reported that most Series S buyers were brand new to the Xbox ecosystem. But at some point really early on (like 2022/2023), they just gave up with marketing for both consoles. Even now the new editions have been launched with zero actual marketing other than saying "Hey these are here: go buy them." As a result, no one is really interested. The Series X has even overtaken the Series S as sale prices deepen and the Series S becomes a punching bag for people who want to blame it for their dissatisfaction with this generation.
I do think on PC and Cloud Xbox plans to at best offer a solid standard experience. That is to say, unless something majorly changes I don't even Xbox thinks they can be the "master" in either avenue. They aren't going to reach the quality of GFN unless they pivot to PC infrastructure for the service and charge out the wazoo in terms of pricing (this would also mean dropping the subscription library aspect of Game Pass or charging an additional premium for it). There's a very unlikely chance of them matching or even surpassing Steam at least in terms of the quality of their storefront and launcher, but that's only IF Microsoft gets the entire Windows team behind it and pours a LOT of resources into the endeavor. I do think we'll see some of this and the Xbox experience on Windows improve (which has been directly stated now as well), but Microsoft is unlikely to reach Steam. No console experience is even at Steam's level and Xbox's Microsoft Store is trash in more ways than just gaming. That said and speaking of consoles, Xbox doesn't exactly offer a significantly worse experience than their brethren. In fact, in a lot of ways they offer a better one (like free cloud saves and backwards compatibility and the best library subscription service). Xbox's real mistake this generation was not making the user experience look shiny and new. You could also argue the Dual Sense over took the Xbox controller, but everyone like unanimously agreed that Xbox had the best controller last gen and it really did not win any wars. I think for their users and the console space as a whole, Xbox went with a strategy of keeping language and interfaces consistent with the updated Xbox One UI & UX, which just failed to market to their users why they should upgrade (among other things). Which granted maybe that was the strategy as truly generations mattered less this time around. If Xbox still takes losses from each individual console sale, then why even try to make people upgrade if they'll just keep playing the same games? Sony had already started selling consoles at cost, so they had reason to push for upgrades. The end result however has just made the Xbox brand overall look weaker.
It is said as much in this article as well to an extent, but really on paper why is Xbox hardware declining? Yes they've pushed for a more multiplatform strategy, but every publisher that isn't controlling costs and wants to grow is (as in expect for Nintendo), which includes Sony. At the end of the day Xbox as a console has gained more former exclusives and more day one titles than it even COULD lose in its own exclusive lineup. A wider ecosystem offers more value for consumers not less. The console market as a whole has been stagnant for multiple generations now made evident by the Nintendo Switch's massive success, which is just the console hitting about the same peak that the PS2 did nearly 2 decades ago. There's no answer for me as to why Xbox is suffering other than a failure of marketing and messaging. In a console market entreached in decades of "console wars" having gamers use exclusives as weapons against other gamers (which is so very sad), Xbox has done nothing to change this narrative as they lead the charge in changing the landscape. The only clear interview, I've seen of Xbox proving why a multiplatform strategy benefits all console gamers is a variety interview with Matt Booty very much aimed at the business world. In it he described how Sea of Thieves on Playstation has led to increased engagement on Xbox and PC on top of bringing the game to a whole new platform of gamers. Xbox hasn't publicly presented this stance though. All they've done publicly is damage control, which has only really resulted in consumers burnt by companies in the past to double down that Xbox is abandoning hardware. "Microsoft is testing the waters" gets thrown around (I know you've said it earlier), but the issue with that is people come to their own conclusions when Microsoft doesn't clearly present their findings. This isn't some controlled focus group environment. We can also go back and show Xbox leadership saying the exact opposite to what they are doing as recent as the 2023 court case. Gamers particularly love the quote that Xbox leadership said Song will use the money they earn from Xbox first party games on PS to hurt Xbox.
It has gone from mixed messaging to a failure to communicate entirely and marketing for consoles has all but disappeared. It is my own personal hopium that rumors are indeed true and Xbox is planning an early new hardware generation in 2026, because that would explain why they stopped really marketing the Series consoles so soon after release. However, even if that's true, Xbox might suffer irreparable brand damage in terms of the value of their console hardware in the eyes of consumers.
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