It doesn't even matter if Gamepass or Xbox is currently profitable or not. It's about whether it can be more profitable. They originally thought the path to that was through exclusivity - now they don't (just as Sony changed course in regards to putting stuff on PC). Anyone who thinks that corporate decision-making is ever based on anything else is being naive.

The practical concern here for me is at what point does MS find it most profitable to stop supporting my ability to use my accumulated physical and digital xbox software. Another reason walled gardens suck.

Microsoft with gamepass (and other large game companies) are trying to do the gaming industry what Spotify did to the music industry. Blow the bottom out of it, get consumers used to subscriptions where money goes to massive companies not the artists actually doing the work, and let it all collapse into a heap so execs can do whatever they want because workers in the game industry have zero leverage left to dictate a higher quality of life since the path to profit has been carpet bombed by the finance industry (you don't want to work for Microsoft or Sony? Oh sorry yeah nobody else can make money in video games so tough luck finding a job somewhere else).

Why now? Well unlike the movie industry, video game nerds have a stunted awareness of the value of unions and worker organization so in plain daylight the rich can drive the entire industry off a cliff, fire a huge percentage of the workers and try to replace them with AI.... and worst comes to worst those companies will be in a great position to demand whatever they want from the remaining human labor after the dust settles even if the AI crap doesn't work.

Good old Disaster Capitalism.

Windows is everywhere but the Microsoft Surface products still have value to Microsoft. Or for that matter, Steam is everywhere but Valve still made the steam deck. There seems to be some value to software companies making hardware if only to help set the tone and introduce features or ideas they hope other companies who use their software will follow.

That said, I wonder if we won’t see the Xbox brand transition to software only with a line of gamer targeted Microsoft surfaces advertised as Xbox ready.

Also, you really can’t trust anything that comes out of Phil Spencer’s mouth.

That's really not a Phil Spencer thing, and more of a "You can tell any executive is lying, because their lips are moving" thing.

It’s almost as if Microsoft is a software company at heart and just wants to sell as many copies of their software as possible.