I'll put it like this. If their goal is to just be a huge 3rd party publisher going forward the existence of Game Pass which cannibalizes sales of games makes no sense. They could sell more games being on all hardware and not having a subscription service at all.Microsoft is going to have to put Game Pass on all Smart TVs for this plan to work. They will also have to improve the Xbox mobile app to make it worthwhile for people to use.
The impact of all this will be interesting. I imagine some companies counted on Sony moneyhatting exclusive games. If there's no more Xbox there's no more of that and no need to cut marketing deals if you're the only game in town. Xbox was also pumping money into the industry for Game Pass and indie devs really benefited from it. If the goal is just to be a 3rd party publisher that goes away and those devs are left to fend for themselves.
I'm still of the belief that this is all to build their own shyt using other people's audience. You expose your games to a wider audience and give them the pitch that the sequels are going to be on your stuff first for a window and also on Game Pass day 1 there.