I agree, there is no replacing Microsoft. They themselves have proven buying up studios with no clear vision and strategy is stupid. If you need further proof, look at Embracer Group. They've sold or closed much of what they bought, often without releasing any games in that time. They bought Gearbox, and didn't even get a mainline Borderlands game out the door before selling to Take Two.
Sega would be great, but they had problems long before the Dreamcast. They have had a lot of success recently with stuff like Yakuza, but also through acquisitions like Atlus and the Persona series. The same games for Squenix, their ratio of critically acclaimed games to duds has been generally lukewarm to terrible since the merger, but they publish lots of stuff through studios they acquired or publish for. You need new exciting IPs to lure in customers and they haven't provided much of that in the last couple decades, you can only buy so much before you need to create something new yourself.
I think a console with the combined might of Squenix, Sega, Capcom and one or two other companies would slap, but with the exception of Capcom these companies are not in their glory days. Plus I can't imagine them playing nice and sharing profits(and costs).
The console biz is still worth being in, but it takes work. Sony is going nowhere and PS5s sell well even if they are not putting out much this generation due to their canceled live service plans. Still, gamers are locked into that ecosystem and purchases don't transfer, so why would they leave without a truly compelling reason? All Sony has to do is provide a stable platform and collect 30% of microtransactions and sales, plus any income from first-party games and Playstation Plus.