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Is Xbox needed? No, console gaming existed before Xbox and can do fine without Xbox if for whatever reason MS decided to leave. Hard to say if Sony and/or Nintendo would allow GamePass onto their platforms. I could see Nintendo being more open to the idea simply due to them not needing 3rd party games to be successful, Sony on the other hand would probably be more against the idea.

Regardless, I don't think MS is planning to leave console gaming anytime soon. I'm not sure why they would buy all these studios just to give up a handful of years later. We'll see another Xbox console after the Series X/S (beyond that, who could say).