1. I could be mistaken but I believe Netflix profited almost two billion last year? Netflix isn’t the best comparison if you’re predicting bad things for gaming, because the service not only makes money but it produces massive, expensive content. I’m sure Disney+ and GamePass lose a lot of money, that’s how new services and businesses work, especially these kinds. You have to buy all this content and you have to offer it dirt cheap to get people interested. It’s a long game.
2. Big games do cost more money which could lead to bigger losses but they also make more money. Sony said this gen something like 7 out of every 10 of their games aren’t profitable. But those 3 that are, make huge profits and offset the rest. You can invest more money into a huge project that you think you’ll see a return on. For example, Disney spent over 350,000,000 to make the last Avengers movie. They’re ok with that, because they know it will profit billions. But does that mean they’ll also spend that amount making Spider-Man or Ant Man or Doctor Strange? No, that wouldn’t make sense. Games are the same. Sony wouldn’t spend the same amount of time and money on Sackboy as they did LoU2. Also, a stark difference here with original content for video services, is GamePass games are available day one outside of the service. So why would MS invest less into a Halo or Gears or Avowed because of GamePass, when they’ll also be charging $60-70 for them outside of GamePass? They can still get that retail revenue, AND GamePass.
3. I don’t see why a GamePass service would lead to less big game projects. Many of the most expensive television series of all time are on subscription services. Even the movies are starting to catch up on blockbuster Hollywood numbers. IIRC Netflix has three 200,000,000+ projects in the works and Amazon has the Lord of the Rings, which is more of a series but will supposedly cross the billion dollar mark. It also hasn’t affected quality... in fact I would argue subscription services have past broadcast television years ago. Every now and again you get something like a Breaking Bad but for the most part network television and basic cable blows. And even Breaking Bad was a cable network.
I just don’t see the logic that GamePass will lead to worse games. You don’t get people subscribed to a service with weak content. Value doesn’t matter if what you’re getting isn’t valuable.