They're saying they lost the console war because they're trying to get a big acquisition approved. They're trying to sell the story 'see how weak we are... we need this to remain competitive'.
It is a fact that Xbox One/Series has inferior sales to PS4/5 in almost all countries to varying degrees. In fact, other than the CMA in the UK, which has taken issue with cloud gaming, have regulators in other countries approved Microsoft's acquisition of AB on the basis that it would not reduce competition, based on Xbox's share of the console market? The UK should also be of the opinion that there is no problem if it is only consoles. I think Spencer's argument is rather counterproductive as a rebuttal to the CMA, since he is not talking about consoles, but rather about cloud games, mobile games, etc., which are the main areas of focus.