Silent_Buddha
Legend
Then why do Microsoft need Xbox at all? If the goal is to reach as many potential customers as possible, walk away from hardware and sell your games to as many platforms as is commercially viable, just like Activision, EA, Ubisoft and everybody else.
You already answered this in a previous post.
That's because the service is the platform. The O/S and device upon which is runs isn't important. But exclusive games are a means to an end - to make the platform on which the game is available more enticing than platforms where the game isn't available.
The same used to be true for productivity apps but again, now you to put productivity apps on the platforms you're customers chose to use, not just the platforms that you want them to use.
The Xbox Live/Windows "service" is all that is important. Yes, you offer your products on other services (iOS/Android) because you aren't competing in that service market. And those services aren't necessarily in direct conflict with your service. There's some overlap but no real direct conflicts. And for services/platforms you compete directly with (Linux/MacOS) they don't offer all that much competition except in niche software markets.
You get people using your product on those other services and then entice them to come to your service via offering more feature rich versions of your product on your service. In this case the Windows Service (or platform, but remember, MS has stated it wants to move to Windows as a service).
This has a potential to backfire except for one thing. Almost everyone is doing this. Offering apps on iOS/Android but when available offering much more feature rich and full featured programs on Windows.
What's the point? Similar to iOS and Android locking people into their respective storefronts, MS would like to get people more involved in their storefront.
What does Xbox have to do with all of this? It's just another portal into that service's (Windows) storefront.
It's obviously still a work in progress. Xbox applications (especially games) aren't generally fully featured cross-hardware (not cross platform as the idea is for all Microsoft hardware to run on the same Service/Platform) UWP apps.
Of course, there's no certainty that what Microsoft is currently trying to accomplish will ever materialize. However, that's currently the direction Nadella has the entire company moving in.
In this respect, Steam/Valve is actually a much more dangerous competitor to Microsoft's plans (which include the Xbox) than PlayStation/Sony as they operate on the same Service/Platform and are the preferred storefront for games and are increasing their efforts to get general application developers and media companies to sell their products through Steam as well.
As such, Microsoft sees cooperation with Valve as having far more profit potential (both short term and long term) than taking an adversarial approach to Valve.
Regards,
SB