This would be bad for everyone except MS. I guess it wouldn't exactly be bad for Xbox fans either, but it wouldn't gain them anything, only take it away from people who game on other platforms.
As right now every first party Ms game end up realesed without leaving it anymore, on its Gamepass service, so on PC, Xbox (S | X and if supported One | One X), Tablet, TV, android phones (xcloud) .. soon iOS and then anything with a browser (MacBook and iMac and finally Linux users for example) therefore objectively a majority compared to the users of the Sony ecosystem whatever it is (ps5 or adding the ps4+ps5+psnow). Here just do the math to understand how wrong you are. Imagine taking into consideration a player who has the ps5 and a PC and then taking as an example the Bethesda + Obsidian games, we will have:
Doom
Wolfenstein
TES
Avowed
Outerworld
The evil within
Fallout
Starfield
Tokyowire
Death loop
Surely they will release many others but for now we will consider only these. Always for example we assume that they will all be bought not at launch but waiting for discounts at a price of 29.99 € (already unlikely). Now the simple simple part :
Ps5 version : 29,99 * 10 = 299,9 € (unlikely minimum price since we don't know after a while a game will go on sale like this)
Gamepass Players : 9 99 * 10= 99.9 €
(maximum price, here too you can find discounts)
Obviously the games will not all come out together but I have given a intermittent month subscription for each game so whoever buys it can play and complete the game.
Gamepass Xbox Ultimate: 14,99 * 10 = 149.9 €
(maximum price, here too you can find discounts)
I also add this for those who want to play online on consoles.
As you can see for yourself it's simple and contrary to what you wrote, practically the vast majority of players will pay A LOT less to play the same games on the Xbox platform (which corresponds to all the devices mentioned above) and that who will remain cut off from the embarrassing advantage are ONLY the PlayStation users who persist for some unknown reason not to even consider the idea of being able to play on other platforms. The advantage is also temporal since Gamepass users in addition to a huge economic advantage they will be able, at that price, to benefit the game on day one at launch, while in the Ps5 version used in the example we have given the game already heavily discounted so after at least 1+ years after launch)
Obviously those who play these games on the Xbox platform will also have the advantage of being able to play (having paid for it) 280+ other games in that time period further strengthening the value of the offer, because it can happen to buy a game and maybe understand only after the purchase, that we do not like it. In the case of purchase on ps5 if the we don't like the game the only solution is to try to sell it to someone else (only if bought in physical form otherwise if digital we have lost 100% of the money), wasting time and probably some money..
This example applies to any game First party Ms old and new acquisitions.
ps. I didn't do the example on Nintendo consoles because third parties rarely come out on that platform except for some rare exceptions and in any case they are always full price)