Sony generaes around $4B/year revenue for their game subscriptions. Their game subscriptions not only rival gamepass without needing to include there their own games there day one, they have more subs, generate more revenue and must be way more profitable. So if this changes to make them more similar to the MS offerings are real and Bloomberg and Grubb aren't lying again, they will continue competing with them.
The PS Now tier now would also include PS Plus according ot Bloomberg. And PS Now is supposed to get hundreds of games more, and they already have around 900 so we're talking over 1000 games, not 'a few'. With hundreds of them (the ones from the consoles that run natively, currently PS2 and PS4) not only being streamable, but also downloadable.
Currently PS Now and PS Plus each are $10/month when getting a single month of each, so combined are $20/month. Bundled in this new service in the higher tier, you'd get more content than now for a cheaper pricing.