MS could indeed cut their games from PlayStation, but we are in a time where people hate that type of moves from companies. Look at how much people hate Epic Games because of all their exclusivity contracts.EA make garbage games but they do have a very strong effect on sales with their sports games. In the U.K. at least there are dozens of people who buy consoles exclusively to play FIFA. If FIFA and all the other popular EA sports games became PS exclusives that could make quite a big difference to sales numbers. And Sony are ruthless, they would absolutely cut Xbox off as soon as they can.
Although in all fairness I think Microsoft are being stupid for allowing it’s games to proceed with releasing on the PlayStation. I like that they do it but from a business point of view it’s bizarre, they are generating profit for their direct competitor.
Same would happen with Sony if they did a similar move, there would be a backlash of people upset.