They just fired a lot of the gaming studios they used to own. (Tango, Arkane), and cancelled most of their major upcoming projects (Everwild, Perfect Dark, the new MMO, etc)

And - while there are rare examples otherwise (like iD software), many of their studios haven't made a well received game in over a decade.

It's not necessarily a great thing for the industry, but Microsoft leaving gaming entirely would not be that terribly tough. If anything, it would probably have the least amount of impact now, then it would have at any other time since 2001.

Not even close? Tencent and Sony likely have (indirectly) more game developers on their payroll, and even the top 3 (MS, Sony, Tencent) combined aren't that much of the market. Nobody seems to control even 10% of the 500 billion dollar video game market.[1] Also note that for MS and Sony this revenue may also contain sales of third-party games through their stores.

[1] https://en.wikipedia.org/wiki/List_of_largest_video_game_com...

They own a bunch of AAA gaming studios, which have been producing flop after multimillion-dollar flop. All that while random indie darlings produce high quality cross-platform hits for a fraction of the budget.

Not any of the good ones though. The long-tail of game developers are where most PC gamers are at these days, the AAA slop have large numbers on a per-game basis, but aren't very large compared to the whole gaming market.