The overall thinking in regards to the Xbox and the smarthome here, Nadella says, is that Microsoft is pushing Windows 10 onto everything, from laptops and desktops to tablets to, eventually, connected home devices.
Eventually, Microsoft's Cortana digital assistant, which is included with all consumer versions of Windows 10, will become the speech interface you use to control your Windows-powered smart devices and entertainment alike, kind of like what Amazon does with its Echo.
The Xbox One is getting Cortana in an update early next year, putting it in a good position to be the point of interface between you and your smart stuff.
Nadella's comments reveal a fundamental truth behind the situation: The Xbox is closer to a cheap Windows computer than ever before. It's even getting the Windows Store app market some time next year, though the details remain hazy.