Xbox is in complete disarray and is imploding. I haven’t owned a PlayStation in decades. If my son’s Xbox Series X (the worst naming ever) suddenly dies, we’ll either switch to PlayStation or build a PC.
I don't think it's played; it's that idiots brought low-margin businesses into a high-margin enterprise b2b saas company (that exploits a monopoly too) and are shocked that gaming is not going to give you 30% or higher margins. Nintendo is super disciplined and a bad year for Microsoft margin-wise is one of Nintendo's best. If Nintendo can't regularly hit 30% margins, nobody can, and certainly (as you say) people who don't game and don't know a single thing about gaming except speedrunning a tutorial aren't going to do that.
Firstly, yes PC is mostly digital only, but there is at least competition between PC gaming marketplaces, which helps to restrict anti-consumer practices like deleting content that gamers have paid for.
Secondly, some of the competitors in the PC gaming space allow for physical backups of installation media, which helps with game preservation. For example, if a game is bought on GOG, the installer is mostly/always one that can be backed up onto physical media.
Thirdly, while it's true most gamers have moved away from physical media, it still has value. For example, second hand games allow for more people to take part in gaming than could otherwise (legally) do so. Taking away physical games won't stop people on low incomes from wanting to game, and is likely to lead to a resurgence in game piracy. Not exactly the outcome game industry leaders are likely to welcome.
I think that’s the really important implied question right now. Mostly everyone already has some form of device to play games on. What happens when they start to die off?