They just bought a publisher for 7.5 billion dollars for this division. How are they fighting for their lives? The move was to get people on GPU. Thats it.
I'm not Nadella, so I'm not sure what his criteria is on what the division performance must be. But I wouldn't have given Phil that kinda money in the first place - for sure. Dude is incompetent managing that ship, as was he when managing Xbox studios as the head under Matrick - but that is just my opinion.
Once the one trick pony of turning Gold subscribers into Gamepass subs has maxed its usefulness where will your organic growth come from? You're back to the same old place you where - subject to the same market pressures and competition. If you're resorting to those tactics now, instead of doing so out the gate when Gamepass was launched (or shortly after) it tells me as an observer that there is strong internal pressure to deliver on growth figures and that it wasn't part of the initial strategy (which is compounded by the fact that you just got a 7.5B gift for a "no excuses to deliver" send off). Although there is the possibility that they did think of it but in order to give the ploy (Gamepass) a chance they thought that selling it as an optional sub was more appealing to the audience (to not be seen as pushy and mandatory, and avoid branding association aka "the new Gold"), and thus its value proposition had to be extremely low within a set time-frame (introductory period) in order to give marketing a chance to create a bandwagon effect backed up by loss-leader pricing (which is what they've been trying to do - "best value in gaming™").
If you look at Phil as a spoiled brat you get something like this:
"But but... papa Nadella, Sony has all these studios making content, we have so few....it's not fair."
Papa Nadella is like: "here go buy some new toys. But... no more excuses".
"Sure Papa".
With Phil crossing fingers hoping the division can stay afloat until the next CEO is crowned so he can attempt to sweet talk him too.
One of many possible reads.