First of all, as others have pointed out already, it's rare for a game that isn't made by a Microsoft studio to launch day one on Game Pass. There have been a few games that have done that and I'd be curious to see how success they are on that plan or more curious to know if maybe Microsoft gives them a larger cut if they choose to do that.
From what we understand, Game Pass games are monetized based on "interaction" aka "how long someone plays that game" and I believe it's a percentage of an individual's time. Since Game Pass is a service that requires and internet connection to Xbox Live, they seem to be tracking some interesting user metrics but the biggest one being "how long did jshackles play The Outer Worlds this month?" and then splitting up that user's subscription fee among all the publishers of all the games that were played by that user (with Microsoft also getting a flat percentage).
So people that use the "but this incentivizes quantity over quality" are not correct. This business model incentivizes developers to make deeply engaging games - both single player and multiplayer. The Outer Worlds is a good example - because if you've played through it twice already then you've probably spent the lion's share of your Game Pass subscription this month playing just that game. Since Obsidian is a first party studio, that means that Microsoft gets the entire cut of your Game Pass subscription this month and doesn't have to share it with any of the other games on the service. Obviously, this is why it's advantageous for Microsoft to buy up a studio (in addition to it helping to grow the brand).
As a consumer, it's a great service and a great price. As a developer or publisher, the onus is still on you to make a great game that's engaging because if you don't you won't get people to play it very much and that's how you get paid. The awesome part is that this is all 100% optional and customers are still free to buy whatever games they'd like and own them forever also.
