As nice as giving complete creative freedom sounds, you run the risk of multiple studios wanting to do something similar and your first party studios lacking diversity. I think Sony were dumb for allowing two first party studios to work on realistic driving games (Gran Turismo and DriveClub) simultaneously and encouraging two exclusive single-player post-apolocyptic narrative not-quite-zombie survival games (The Last of Us Part II and Days Gone. You may please the fans of those genres but you're also missing an opportunity to do something different for fans who are not into those genres.
Using Sony again as an example of how not to do it, lack of oversight also leads to absurdly (and surely loss-leading) glacial development times like Gran Turismo and The Last Guardian.
Just don't do this, Microsoft.
The problem of Gran Turismo and The Last Guardian are not the freedom gives by Sony. The reason Fumito Ueda left Sony was because Alan Becker wanted to give less freedom to Japan Studios. The problem of GT et TLG is to be japanese game. FF 15 had troubled development too.
The studio with the most freedom is Naughty Dog but theyt know what they are doing. Naughty Dog has no producer...