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Microsoft as a whole pivoted hard from the PC as their preferred gaming platform to the XBOX as their preferred gaming platform. As for the whys at the time i assume they wanted to make sure that their console was competitive and didn't just die on launch. They probably also considered the PC gaming environment to be so healthy producer and publisher wise as to not find it worth their time to do in-house development for the platform anymore. As for MSFlightSimulator it didn't fit in the console portfolio at the time, mostly because of how those systems are usually interacted with, and also because the install of a basic global world mesh is huge. Good luck landing a 747 with functioning cockpit knobs with an XBOX controller, and say goodbye to the limited hard drive of a console when you have to install 70GB of world mesh to make it the global experience everybody expects. So making it a good cross-platform game on 2002-2015 tech would have been an exercise in making both console and PC gamers unsatisfied.

What you see now though is that MSFT is pushing really really hard into cross-platform play, and investing directly in gaming companies to make sure that the XBOX remains a competitor to the Playstation environment as Sony has been on a roll when it comes to impactful exclusive games for their platform for a while. Their latest E3 presentation really showcased just how much they consider this a priority, and how hard they are currently working to get their own environment of exclusive publishing houses with AAA games up to the standard of Sony. Due to the narrowing of the gap between high powered consoles and high powered PC's in the later years it makes sense that they would do this now as at this point they can offer a flight simulator experience across both platforms that is (hopefully) not only incrementally better, but transitionary better.