Problem is that they have no vision. Microsoft has many factions inside it focused on different things. While the server team took a left turn and just announced they will have the Microsoft Server products run on Linux, ending Windows exclusivity after decades(?) of being locked to the platform, the Microsoft Store people probably want exclusivity over UWP to force people to use store to get their revenue up, and the games people see that they're going to sell half the numbers that PS4 does throughout the generation and are trying to take over the Store to mitigate their bad performance.
On top of that you have the people in charge of third party relations is doing a bad job of ensuring timed exclusivity (after the Rise of the Tomb Raider bomb, not many publishers are going to be signing those types of contracts). I saw more ads from Squeenix for the PC version than I saw from what I expected to be the combined marketing budget of Squeenix and MS for the XBone version. Completely terrible deal for both parties, but I think it severely damaged MS's reputation for any other parties considering timed exclusivity for games. Now it seems like they're focused mainly on timed DLC, which basically nobody cares about.
The team in charge of first party probably has their hands tied by 8 different upper management people telling them conflicting information. One of them probably said "We need a Minecraft!", which led to valuable first party resources being wasted on Project Spark. Someone was able to say "We need a unqiue game, something that will make our platform stand out aside from the usual FPS and TPS," lobby enough to resurrect the Phantom Dust franchise, which was apparently looked at by someone who asked "How many millions will this sell? One, maybe? Well we've already got Sunset Overdrive, that's unique enough" and then canned it. Someone looked at Lionhead and said "God, Fable The Journey really tanked. Wait - we have another Fable game in development? Well it must be almost don- It's online?! With continuous development?! Cancel it! In fact, cancel the whole studio! Buncha morons!"
The team in charge of digital games on the XBONE as far as I know still has their parity clause is still in place, the purpose of that being to encourage devs to release first on XBONE or at the same time on XBONE. With developers placing more priority on the PS4 version because there's more PS4's in wild, the XBONE digital team's parity clause is effectively preventing developers from releasing games on the XBONE unless they take significant effort to create new content for the XBONE release.
The people in charge of studio management has successfully closed pretty much every studio they possibly can, leaving them with basically no first party except for 343, Rare, Mojang, the Forza team, and the team that got handed Gears of War. Their only second party projects are Recore, Quantum Break, Scalebound, and Crackdown 3. So they're left with just a handful of XBONE exclusive titles over the next 2-3 years.
Phil's looking around going "We've got no exclusives, we don't have a steady flow of digital games, and our console is weaker. How the fuck did we go from the 360 to this!?", and now looking at some kind of bandaid via PC or an Xbox 1.5 or cutting the generation short and trying to spin an Xbox 2 w/backward support (shifting development resources almost entirely to Xbox 2, abandoning XBONE) as an incremental upgrade in the same console cycle.
It's really incredible how so many different groups inside MS have managed to damage MS games division so heavily. Especially contrasting with how Sony's managed their games division, by catering to third parties while keeping their biggest first party studios working on showcase titles. Nintendo's been terrible about catering to third parties aside from just a handful (Atlus, Capcom, Squeenix, Level 5), but because they basically never shut down first party studios, they've been able to tread water through the disastrous Wii U gen and less-than-stellar 3DS gen by continually releasing really good exclusives. It's so weird to see MS hardly focusing on first party at all aside from Forza and Halo, and not catering to third party either. They're basically just left with worse versions of PS4 games, and now that they're suffereing from the consequences they're scrambling for a solution.
The MS team is so disparate and full of conflicting goals, each group or micro-group of a project is trying to come up with half-assed bandaids for the problem they see in right in front of them, ignoring the other thousand cuts the company's currently suffering from. They need to completely restructure the organization.
