The big issue with GamePass long term proved to be that it was driving customers out of actually buying games.
No. It WAS significantly dampening sales of games on GamePass.
Most large 3rd party releases with published data showed a very large discrepancy between Xbox and PlayStation platforms in percentages in sales, far outside console number ratios. Hogwarts was one earlier example but it has been well illustrated by most releases. Note that these games don’t necessarily have to be in the service, customers have been trained that there is no point in actually buying games.
The discrepancy comes from the console number ratios AND the high digital skew on Xbox, driven by the all digital Series S and higher overall digital ratios on Xbox.
It also doesn't serve Xbox well that in households where the Series S is a secondary console, it makes more sense to buy games on the more powerful PS5.
Nobody skipped out on Hogwarts because of GamePass. Ditto for games like COD or FIFA. Hogwarts is a weird example to use since it coincided with a ton of PS5 sales after the shortage ended. Significant skew, as a result.
GamePass has been in existence since 2017 or so, and yet Elden Ring had 41% on PS vs 29% on Xbox, fully representing the platform share at the time.
This trend is especially bad for indies because expectation from customers is that games will show up in GamePass (or to lesser extent PS+ and EGS).
That expectation can become ruinous for an indie studio trying to sell their next game when first was on GamePass because they don’t build an audience essentially. So their next game is just as hard to sell as if it was their first to an extent.
That’s the biggest issues with GamePass, it drives down purchasing habits of customers in the entire industry to an extent. PS+ and EGS also contribute to that mentality but to a lesser extent due to general lack of Day 1 releases on their services. Well, Sony sometimes does have Indie games Day 1.
Again, there's no logic in assuming this applies to GamePass alone and not with PS+ Extra subscribers. Both services get indie games, and both have their share of Day 1 titles.
If your claim were to be correct, then Day 1 or not wouldn't make that much of a difference. People are usually VERY willing to wait for A and AA titles if need be.
I have no idea how you say a popular Indie on GP wouldn't have built an audience for a sequel.
That’s the biggest issues with GamePass, it drives down purchasing habits of customers in the entire industry to an extent.
I don't believe there's any data to support this, though.