The problem I think many people are having with this Microsoft move is that people don't understand how this move wasn't about video games, and people think video games is this really profitable industry when it really isn't. Microsoft's move was more about keeping people in the Microsoft ecosystem. Satya Nadella (Microsoft CEO) wants Microsoft to be a mobile and cloud company first, above all else. He wants people to be in the Microsoft ecosystem and actually enjoy being there, not just because they have to.

Giving Windows 10 away was a smart move because now everyone is playing on the same playing field. Microsoft can push all these new services and products to everyone and not just the people who adopted it. Basically, you're running a Xbox if you have a Windows 10 PC, even though it's probably a weak one. Therefore, you're ready to purchase Xbox games already.

What Microsoft wants is to make sure that people in the Microsoft ecosystem stay in the Microsoft ecosystem, and if you're not in the Microsoft ecosystem, then ecosystem just became more attractive. If you're in the Microsoft ecosystem, you're more likely to buy Microsoft products across the board like Office, Windows Phone, and whatever else they have in the pipeline. Keeping you in the ecosystem makes them more money than selling some hardware once and getting small money off of video game sales.

People think gaming companies make bank and that's true, but gaming is small change compared to Microsoft's overall business. Microsoft has entire product lines that are worth more than Sony's entire business, let alone its Playstation division. That's where the money is.

TL;DR: Microsoft (rightfully so) cares more about keeping people in the Microsoft ecosystem than individual Xbox sales. Unless you're using Linux or MacOS, don't have a Windows phone, and are using something other than Office as your productivity suite, you aren't the person this move was targeted to.