Huge corporations like Microsoft are not averse to making catastrophic strategic mistakes.
When Gamepass launched anyone questioning the long-term commercial viability of the service was brushed aside, accused of sour grapes, stuck in the past, and so on. Gaming is fundamentally different to Music, TV, Film in that it's not only time consuming, it's an interactive medium requiring your full attention. For most people they can only support a couple of games on the go, purchasing maybe half-a-dozen titles a year.
Gamepass is increasingly being used as an extended demo service, which is of limited use once the novelty of hundreds of games at your finger tips fades away. For price sensitive gamers it often makes more sense to purchase the odd game (physical can be traded in, or wait for a sale on digital), rather than being tied to a subscription for years on end.
The fundamental problem is Gamepass is targeting casual gamers, but casual gamers are just that, casual. They don't need access to such an extensive library. I've no doubt Microsoft will make a strategic change and become a third party publisher. It makes sense to support all platforms while still offering Gamepass to those consumers who want it on their own platform.
