I am surprised to still see Ballmers' "Windows in the living room" idea... somehow believing there is something magical about yet another version of Windows.
The real talk is that, while at one time being on top, Microsoft has lost the Operating Systems wars. As Android and iOS become the default computing operating systems, Microsoft presence sinks further out of relevance. They will be no world wide line-up to migrate to Windows 10, from Android or iOS. TV makers, cable providers and streaming device manufacturers do not need, nor want, to suddenly move to using Microsoft operating systems.
Nadella knows he has to continue the pivot to services. I see the remainder of the Xbox One's life to be a slow migration to services integration. Live needs to be an icon on my TV set than runs a small application, just like Amazon. Their services need to run on any platform, because their platform is market share anemic in mobile, tv, tablet and console space. I am surprised they do not have a PS Now like solution, but I would not be surprised to see that happen.
Anything short of full multi-platform and agnostic LIVE content delivery, will be a failure on Nadella's part. I think that is where he wants to go, but he has to slowly flush the Ballmer infection out. If he does this, he will be cheered by investors.
Unfortunately to do this, they need compelling content and a well managed Xbox LIVE (or LIVE/xbox ) division.