Not really. PlayStation doesn't "need" Xbox to compete as a strong 2nd in order to prosper. Nintendo doesn't really have a handheld competitor anymore but they've been putting out some of their
best 1P games ever on the Switch. Now, would it be nice if Xbox were a stronger #2 to compete against it? Of course. But is it a
necessity in order to keep PlayStation healthy or honest? No.
I mean, the PS2 was virtually uncontested by Dreamcast, Xbox or Gamecube, but for many that's still a golden age in gaming and we saw a lot of the best games ever come out on that system. Lack of any of those other systems providing any real market competition (in terms of outselling the PS2) didn't stop Sony from dropping PS2's price over the years, or doing a Greatest Hits line of games at cheaper retail prices, either. And the online (albeit not as good as XBL's of the time) was free.
If I want Xbox to be better (and I do), that's so that the brand can live up to its own potential, not to keep PlayStation "honest". PlayStation doesn't
need Xbox for that, and it doesn't
need Xbox in order to be motivated to keep empowering great 1P and 3P games. Customers and money are reasons enough Sony would want to keep that going strong. But I would definitely like an Xbox that is a stronger competitor.
I want them to earn it, though, not buy their way into the position. Like I've always said, Microsoft does have some quality games. They just released one last month, and another one (FH5) is getting a rally update later this year. I've never agreed with the idea that Microsoft's 1P is "trash"...but there's a difference between having mostly good 1P games and having 1P games with mainstream, mass-market appeal. It's the latter of those which Xbox is VERY weak in; they either outright lack such games, or have an IP or two fitting the bill yet is not associated with Xbox as a brand.
Halo is shell of its former self. The Forza games have never been big mainstream hits. Gears is mostly irrelevant now. Cuphead saw more success on Switch, PS4 and PC well beyond what it did on Xbox. Sea of Thieves is "modestly" popular but not in a critical way. See what I mean? I think MS know this and it's a massive reason they went for Zenimax, and why they're so desperate for acquiring ABK. Elder Scrolls, DOOM, Fallout, COD, Warcraft....these are names people know, they have tons of mainstream mass-market appeal, and they're also generally great games on top of all that.
But like I said, I don't really agree with Microsoft wanting to buy their way to that rank in terms of such IP. When you look at Sony's marquee 1P games, between GOW, Spiderman, TLOU, Uncharted, GT etc....Sony spent many years, decades in some cases, carefully building up those IPs as franchises with mainstream, mass-market appeal, over multiple console generations. When you look at Nintendo with Mario, Zelda, Pokemon, Smash Bros, Mario Kart etc...they've done the exact same thing, building those up over decades with carefully curated games over multiple generations of hardware.
Microsoft's problem is the same as what Sega suffered from: lack of marquee IP retention over multiple generations. Almost every console gen, Sega discarded older IP and made newer ones. In some cases, like Sonic, they actually skipped a whole console generation curating the IP the way they should have, which impacted future releases (Sonic Adventure on Dreamcast would have been an even bigger deal if a proper Sonic game came out for the Saturn). Games that
SHOULD HAVE (IMO) gotten sequels never did, like Ristar, Pulstar, and Eternal Champions (all of these should have gotten sequels on the Saturn, and maybe even sequels to those on the Dreamcast). Games like Phantasy Star should not have skipped the Saturn, either.
In Sega's case I think their arcade heritage was a big reason into why they were late to start curating IP over multiple generations, because in the arcade space it was regular to do one-and-done type of games (IP/franchise-wise) or not to linger on a given IP for so long. You needed big new hooks to draw players to your offerings so going through IP in short spaces of time was normal. However that wasn't going to translate well to console and I don't think Sega really started zeroing in on it until it was a bit too late. Microsoft doesn't actually have that excuse; they were in the PC gaming space before coming to console and should have known from there about how many of the bigger games (Ultima, Space Quest, etc.) built up their audiences through multiple releases over periods of years and across multiple PC "generations". If not from there, then they should have been able to observe Nintendo's work in IP retention for Mario, Zelda etc. over the NES, SNES and N64 generations (and to a lesser extent, Sega's with Sonic and Virtua Fighter), learning early from those.
But MS let almost all of their marquee franchises either burn out or stagnate too soon. Halo peaked with the 360 (critically & commercially); Gears also peaked with the 360 (critically & commercially). For all intents and purposes, Forza Motorsport stagnated in terms of market growth years ago. Fable peaked with 360 (critically & commercially). Crackdown peaked with 360, as well (critically & commercially, and Crackdown 3 killed the franchise). MS never built on IP they should have in order to keep long-term variety in their 1P lineup (Viva Pinata, Too Human, Blue Dragon, Lost Odyssey etc.). And with XBO there are IP they should have tried building on harder and associate more closely with the Xbox brand, but failed to, such as Cuphead.
All of those are due to Microsoft's negligence, but unlike Sega (who had to leave as a platform holder and focus on rebuilding mindshare of several IP on once-competitor systems), Microsoft have decided to stick with making consoles. And, they realize their problem....I just don't agree with them buying massive publishers and IP as a fully justified solution, not without some compromises (which is what concessions, hopefully involving structural remedies, would involve). Microsoft could have easily spent the second half of the XBO gen rebuilding their 1P the way Sony did with PS3 (which paid off massively to repair brand damage and helped set up the PS4 for success). But Microsoft chose not to do that. They chose to dilute the brand identity of Xbox by putting all 1P games on PC Day 1. They chose to focus on programs like BC and services like Game Pass instead of completing games like Scalebound and Phantom Dust reboot, or salvaging train wrecks like Crackdown 3.
Microsoft didn't put their priorities where they really mattered and now they're paying the price for it. But just because they're paying the price, doesn't mean they should get to buy up giant 3P publishers on their own terms and potentially set a dangerous precedent for industry consolidation (at least in terms of buying huge 3P publishers as a platform holder; I don't really like Embracer Group acquiring a lot of studios either but they have no incentives to leverage that content for a non-existent console or gaming service). Mind, I still think they should be able to buy ABK, but not without accepting some form of structural remedies (and I've already mentioned what I would consider fair structural remedies, if they could enable things like MS retaining partial ownership of the divested asset, but MS/Sony/Nintendo able to acquire publishing rights of content of the divested asset for their own platforms, have some limitations for service rights depending on if they're Day 1 or not, etc.).
And if Microsoft are stubborn to the point of not accepting that, then maybe it was never a good idea for them to acquire them