I actually think that, from Microsoft's point of view, Gamepass is a great business venture.
Aside from the 360 (which was first-to-market and held its own for like a decade), the deal with Xbox has always been that, in exchange for zero exclusives, a higher console price, and having to interact with Microsoft, you get the best performance on console video gaming, no questions asked. That's something that really grabs people who post on video game forums and play hardcore games like
Cybergod: Unleashed and
Oppai no Nazo [EX Edition], and it worked for many years, but the enthusiast marketing in today's video gaming culture can be tough to depend on.
Enter Gamepass and the Series S. It's half the price of a Series X, and you
don't even have to buy the games. If you're a family buying a console for your kids or a dudebro looking to get in some FIFA with the boys after work, that instantly becomes the XBox's competitive advantage. You get an unlimited supply of prominent third-party titles whenever you want them running on a machine that would cost at least four times the price if it were a PC and the peace of mind that you'll never actually have to buy full-priced games. And Microsoft gets all your money, forever.
I've never owned an Xbox console, but sometimes I'll see the Series S on Amazon and think "OH MY GOD, THINK OF HOW MUCH I'D SAVE..." That's what a significant chunk of the XBox target demo is thinking, too.
If the chips ever came down and developers made moves away from Microsoft (they won't), M$ would start subsidizing new third-party games themselves in exchange for permanent availability on Gamepass. (Even if those games weren't exclusive.) They have the money and might to throw around, and the audience will always make it worthwhile for the people actually making the games to comply.