Starfield is cheap? Elder Scrolls 6 will be cheap? Fallout 5 will be cheap? Fable? Hellblade 2? Indiana Jones? Redfall? Perfect Dark? Avowed? The Outer Worlds 2? What about all the other first party studios like id software, coalition, inXile with games coming to Game Pass?
None of the games I listed are games as a service.
Hard to profit from sub model? This is Microsoft we are talking about... Game Pass is more or less adopting the Office 365 model. Whenever people factor in the profitability of Game Pass and the sustainability of it with very high quality, big budget AAAs you MUST also factor the company attached to this and their ability to bankroll those kinds of things. Microsoft is one of those companies who are perfectly fine with not getting a full premium sale up front. They're more than comfortable getting it over the course of their fiscal year. Such a thing would be more difficult for Sony in the short term because Sony's overall business simply isn't quite as strong as Microsoft's.
In Microsoft's more recent 3 month quarterly report for Q4 FY 2022 (3 months ended June 2022) these were the results.
$51.9 billion in revenue
$20.5 billion in operating income
$16.7 billion in net income
But what about the entire fiscal year? Microsoft's FY 2022 (12 months ended June 2022)
$198.3 billion in revenue
$83.4 billion in operating income
$72.7 billion in net income
Compare that to Sony's most recent full fiscal year 2021 (12 months Ended Mar 31, 2022)
$69.4 billion in revenue
$8.4 billion in operating income
$6.1 billion in net income
Another way to look at these numbers is the following:
For every $5 billion of revenue Microsoft makes $2.10 billion in Operating income
For every $5 billion of revenue Sony makes $605 million in Operating income
It's better to say all this would be far less sustainable for Sony, but not Microsoft. They're not the same. Sony as a company who doesn't bring in the kind of money Microsoft does is more in need of getting their return on their investment faster via premium, full price sales. Microsoft? They're perfectly fine with waiting and getting their money throughout the year. You see what they make in 3 months compared to Sony for a full year?
And keep in mind that Game Pass has grown 15 million subs since 2020. It's no doubt likely to grow further over the next 8 years (not assuming the pace will be the same, of course), especially once the Activision deal is approved and major releases like Starfield and Elder Scrolls 6 drop. Game Pass growing means MORE revenue coming in. We see the way Microsoft as an overall business converts revenue. Clearly so far with Game Pass along with a gaming business that isn't quite as profitable as either Sony's or Nintendo's hasn't done nearly enough to stop Microsoft as a company from consistently reporting record earnings.
So when you suggest games will be cheaper, it will lead to the devaluation of games, and it will never be profitable, be careful to never forget that this is Microsoft we are talking about. They are not separate from Xbox. And when that Activision deal, giving them Call of Duty (mobile versions too), Candy Crush, Diablo, Overwatch, World of Warcraft etc, etc., closes this will all be even more true.