The company chose investment in services over console volume.
An email brought up during the FTC vs. Microsoft hearing revealed that Microsoft had been sacrificing Xbox Series X|S sales for investment in cloud and gaming content.
In the email, dated 2020, Xbox head Phil Spencer tells Xbox CFO Tim Stuart about the reasons behind the low console volume. He says that the "yield miss for Scarlett" (Xbox Series) and the Halo Infinite delay were not the main reasons for the scarce number of consoles and states that investing in cloud gaming has influenced the numbers but he still supports the decision.
“From a strategy perspective I believe in our tradeoffs for Cloud and Content in Gaming over console volume. ... With our strategy and opportunity console volume will still be the thing we constrain to grow our long term ambition.”
Microsoft had to pour money into Xbox Cloud Gaming and its infrastructure, and Spencer thinks it's "critical to realizing our potential in gaming."
“Amazon Luna and Google Stadia do not have the console strength we have giving us developer engagement, gaming community, and catalog of content.”
While the cloud gaming monopoly is concerning for the FTC and other regulators, Sarah Bond, Corporate Vice President at Xbox, has recently said that Xbox Cloud Gaming is the least popular feature on Game Pass Ultimate.
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