GamePass was never going to work.
The entertainment industry has already seen the destructive nature of streaming services. Gaming is separate from TV/movies, but they still saw it.
The pie shrunk. To keep margins up, Microsoft and Sony are offering less money to games showing up on the sub-services. This will make them less and less appealing. That hurts both companies, but Microsoft made it a focal point of their business and growth model.
I think it works as largely a catalog subscription service, but it still needed to be priced appropriately. 10-15 dollars is simply too cheap and that is why Sony went with a tiered approach with PS+ premium already being as high as 18 dollars. I still think their obvious answer is to bundle Crunchyroll in there (that's actually a value add), but that's neither here nor there.
We'll see if Microsoft budges on Day 1 AAA on GamePass and Day 1 AAA on PC. It's going to be an interesting 12 months.