My prediction has long been that since they were thinking about getting rid of it anyway, and they are shifting focus, that what you predict will happen and that eventually either Xbox will not exist or the Xbox of the future will just be a streaming dongle like the firestick. Just a little app store with controller and you stream all of your games over wifi.

They sell it for dirt cheap and no legit console can compete for basic gaming. Sony will still have a hardcore market, especially with vr and their first party titles, but most of the casual crowd would buy a 50-100 dollar "Xbox" so fast and just pay for game pass. It is a no brainer for Xbox, consoles are always a major loss of money and they don't want physical media anyway.

Edit: "We have a different vision for the future of gaming. A future where players have a unified experience across devices. A future where players can easily discover a vast array of games with a diverse spectrum of business models. A future where more creators are empowered to realize their creative vision, reach a global audience, unite their communities, and succeed commercially. A future where every screen is an Xbox."

While they announced new hardware they were real hush on it, just that it would shake up the industry. While I'm sure they would say that regardless and a lot of people say a handheld, either way I don't think it's just a console. A handheld would allow exactly my prediction to be possible but it wouldn't be as cheap.

That quote feels like it nails exactly what I expected though. It might be some time but I do think it will happen and their whole narrative seems to be moving away from Xbox being a console.