Well it's true they'll have an easier time going 3P than, say, SEGA did. Although that's largely because MS spent billions on the Xbox division to buy some of the biggest 3P publishers and IP in gaming before doing so, something SEGA didn't have the capital to pursue.
But as far as that weakening demand for Xbox consoles, well that goes without saying right? I think a console/PC style hybrid device ecosystem can work well enough for them considering it's not some half-assed effort, but even then they won't have the install base of 360 era, or even XBO (if the 58 million number is to be believed). That doesn't mean it can't be successful for them though; it just means that hardware is going to be priced a lot more than a typical console for the same level of performance.
Although, it also invites some new possibilities with device form factors, more streamlined features, alternative storefronts etc. Could even possibly help sustain/grow Game Pass a bit but that's where I've been saying about the soft-subsidization thing for so long. Doing that with alternative storefronts accessible through a locked-in Game Pass tier, that's probably the one substantial way they could still grow Game Pass.
Not to those 100 million targets they were claiming to want years ago, not even close. But again, if they approach the hardware right, and all other such things, maybe the sub install base could grow to a stable 50 - 55 million (assuming it's still stable at 41 million right now...which it probably isn't (i.e stable sub #s are probably lower)).
Shawn Layden is back in another podcast interview that will be milked for multiple headlines in the next few weeks.
You mean like Phil Spencer? I'd rather Layden than Spencer tho; Layden has a track record of running a successful games console, Phil doesn't.