You're entirely right, but they need to maintain Windows in order to promote those services. The OS and their various applications have a symbiotic relationship where they prioritize each other.

If Microsoft discontinued Windows and switched to just providing web apps, the competition would be a lot stiffer.

True but it is still their moat. Without windows they will lose a lot of appeal to their cloud products like Intune, Azure AD, M365 etc

If this is the case, Windows seems like it should be very important. Otherwise they can't deliver their subscription services. I'm not going to subscribe to cable TV if my TV is broken.

Yup. The same thing is happening with Apple. With software mostly moving to the cloud, operating systems are getting short shrift.