so this console competitor probably all digital version of PS5. but still depend on how much the range of the price Sony decided to put on PS5 and PS5 digital. This could benefit them, or backfire hard which is probably why both company still didnt want to reveal their price yet.
long term, Sony probably gonna release smaller and cheaper slim version of both too coupled with exclusives line up and bundle which is could sway the market again.
this idea of 'game pass machine' might more successfull if they somehow can make the console sit on its 'own market' even compared to its superior brother.
but on other aspect considering xbox's next gen exclusives also must scalable to this xbox series s weaker specs also probably mean 'lower' and scalable minimum requirement for pc version counterpart too, assuming their games indeed all come to pc which is, benefit low and midrange user pc users. But dont know how it would be for 3rd party. How much price and performance of low and midrange pc in coming future also is question, considering their game also available there. This could affected the consoles sales too but assuming MS doesnt care people buy their console or not as long people subs to their services so it should be not much of a worry. Ofcourse, how this console end up perform especially long term is important too.
eitherway, gamepass is attractive but a good, interesting exclusives is still important to 'seal' the deal completely. Lot of advantages if they can build mindshare from that while assuming there no other competitor emerges. It is important too for them to secure lot of day 1 timed exclusives, since if the rumors of Sony throwing money for them, assuming they can 'snatched away' casuals favourite game like GTA or COD, those casuals perception of value surely will affected if MS want them to buy these 'casuals targetted' console.