Exclusives are great but with Xbox on deaths door, they have now become less necessary and the recent cuts reflect this shift in the market.
PlayStation need to return to selling as much hardware as possible and pushing third party software sales, with a smaller first party offering.
Nah that's some Good Guy Phil™ kool-aid, not drinking it. Xbox isn't PlayStation's only competitor, and considering platforms like Steam have a ton of their own exclusives by default (including Valve's own games like Counterstrike 2 and DOTA 2), exclusives are very much still important for PlayStation. You don't have a brand identity in the entertainment space without stuff to call your own.
What you also need to remember is that 3P software sales were "pushed" by PlayStation in the past because a lot of that 3P were defacto exclusive to PlayStation. This was especially true in the PS1 & PS2 gens, where the vast majority of the audience for many games were primarily on PlayStation. Over the years and due to increased competition those audiences have splintered off to other platforms like Xbox, Nintendo, mobile, and PC (primarily Steam). Because earlier PS systems had that 3P support as defacto exclusives, Sony's 1P in itself didn't have to cover certain markets because 3P did it for them just by existing and by PlayStation being such a dominant force in the gaming market.
PlayStation is still the dominant force at least in terms of traditional (non-mobile, non-GaaS) core-orientated gaming, but it's safe to say it's lost a good amount of its unique software library edge because a lot of the 3P who used to default exclusively to PlayStation in the past or primarily focused on PlayStation, have gone multiplatform and are releasing most or all of their games on more competitor platforms. There's nothing inherently wrong with that, as such is the choice of the 3P and if they deem it financially viable, that's what they should do.
But it's up to Sony to offer alternatives 1P-wise that can fill the void of those games missing as exclusives to the PS platform, and I think Sony could be doing a much better job on that front specifically because a lot of what's missing now in terms of defacto 3P exclusives are AA and smaller niche-style titles, JRPGs (Persona no longer PS-exclusive, Final Fantasy games coming more regularly to PC/Steam (and likely soon, Nintendo), games like Unicorn Overlord being multiplatform when in the past they'd of been PS-exclusive or at most PS/Nintendo-only titles, etc.), fighters (all the big fighting games are now on PC Day 1) etc.
Although the PS3 gen wasn't great for Sony financially, IMO it was arguably the best of them 1P-wise in terms of overall software variety. You had the AAA story-driven bangers like Uncharted 2 & 3, and TLOU, you had sim racers like GT5 & GT6, arcade racers like Motorstorm, AA-style platformers like LBP & Puppeteer, puzzle games like Locoroco & Echochrome, "artsy" games like Flower, action/adventure games like GOW3 & Heavenly Sword (IIRC don't Sony own the IP for that?), RPGs like Demon's Souls, and small indie-like games like Fat Princess. And that's just the 1P-related stuff.
IMO Sony has to get back to filling those voids left in 3P exclusives no longer being defacto exclusives, and it'd be a lot more lucrative for them long-term vs. pushing for even more timed 3P exclusives (specifically those that don't even delay a PC release for that long, or where Sony's money has had no role in helping to co-fund the game's existence or help with co-development at the technical & creative levels). It ultimately benefits them as a publisher (in terms of revenue, profits, and IP catalog) to have as varied a library of their
own games as possible, to bolster their
own hardware platform, and that also gives them more flexibility in choosing what games to leverage for a multiplatform strategy
if they feel it's worth doing.
If that do that, it ultimately benefits PlayStation and covers Sony regardless of what 3P decide to do. If 3P continue to go fully multiplatform or even prioritize another platform over PlayStation, Sony have their own expanded variety of 1P titles to keep more customers in the ecosystem satisfied, and their profits up. But more likely, 3P will feel more compelled to support the platform than they already do, because Sony expanding their 1P to cover gaps left by once-defacto 3P exclusives now going multiplatform, would be coming at a time where PS as a brand is already massive, and almost all 3P already support it one way or another anyhow. So this just grows more of the appeal for the brand from Sony's end, and that gives more reasons for 3P to support it with content.