I think that they're just trying to kill off the XBox brand at this point. Their product strategy is suicidal. For example, the XBox Series S is now almost 5 years old. This is the point in the product lifecycle, they should be discounting the product and getting it's replacement ready. Instead, they increased the price from $300 to $379 without making any hardware upgrades to the unit.
Who on earth would be willing to pay that much for a 5 year old gaming console? Nobody. Which explains why Costco and Target aren't selling them anymore.
They want to keep the brand, just get rid of the expensive hardware that doesn't pay for itself.
It's been the dream for a console generation to last 10 years, now it's a requirement as the hardware is sold at so much of a loss that you're not going to break even for years even when you're nickel and diming everyone for everything you can.
The problem with the loss leader strategy is that you have to make up that loss somewhere else, the bigger the loss the more you need to squeeze in other areas. Games get more expensive, subscriptions get more expensive, you require subscriptions for more and more features that used to be free. This leads to a situation where people get sick of being wrung out for money and just give up on the whole thing, which means you're not making back the loss you made by selling them the console to begin with.
Sony blinked by upping the price of their already old console to $700. Unlike Microsoft they cant subsidise their gaming division from more profitable divisions.
Computer hardware gets significantly faster every few years, so a 5 yr old console is going to start showing it's age... when you need it to sell for 10 years to make money you're going to have serious problems. I've long said that the "PC wannabe" consoles Sony and Microsoft make wouldn't last, they just cant compete with PCs and don't have the cheap, casual fun USP of a normal console. Also PC's have entered the console domain with the Steam Deck and unlike MS and Sony, the hardware is not being subsidised, so now the PC Wannabe consoles have to compete with an actual PC console.