Sell hardware, sell 3rd (and 1st party) games and mtx on their platform, sell live services and gp subs.. to millions of hardcore gamers who prefer gaming on console or PC and are spending good money. Gamers who play multiplayer games and want the best performance. It's a huge community and business.
I don't see how game pass would thrive by being just a Netflix of games amongst other subscription services and mobile games.
The margins on hardware are slim and only getting slimmer now there isn't really a second half of the generation any more where the bulk of sales generate a profit on hardware. It has become harder to make cheaper slim models next to sales becomes more front loaded.
The XBox app will be the main platform and will be available on PC, TV and mobile phones. I doubt gamepass will ever come onto Sony consoles, but I see it as very possible that it will come to Sony TVs, build into Android. Who knows MS might even be working on a TV OS themselves to become the Windows for TV. That's where MS thrives. MS always wanted a PC in every living room. However Apple beat them to putting a PC in everyone's hand, skipping the living room. MS tried to get into the phone market but was too late. Now hey have a chance with gamepass to get a foot in the TV and mobile market all at once.
Consoles will still be around for a while, yet once xCloud takes off, the masses will go for convenience. We've seen it with music, we've seen it with movies and tv. Consoles will becomes less important just like CD and blu-ray players.
PC will be the place for the hardcore gamers. MS already succeeded in getting Sony to follow putting their games on PC. Next is making PS consoles less desirable by removing the big games on the platform, future CoDs etc, while offering them with gamepass on PC and phones. Then gamepass can thrive on PC, TV and smart phones.