My understanding of GP is that MS keeps all the money from subscriptions, yes. They do obviously make deals with various parties to get their games on the service, in exchange for a lump payment, and depending on the dev/game, there are likely provisions in the deal that sees said people getting bonuses if their game meets certain milestones on the service. Are those real expenses? Of course, but they wouldn't continue to be made if they weren't profitable.

There are a lot of factors you're not taking into account. First off, nobody ever said anything about MS making deals to get all the biggest third party games in the world on their service day one. Obviously, that wouldn't be good business. Naturally, that's why it's important for MS to make strides in providing more top tier titles from their in house studios. Now on to the benefits you're ignoring....

1) Yes, offering up big games day 1, without a full purchase entry is a short term loss on a person by person basis on the face of things. However, you are potentially reaching more players through the service than you would have gotten otherwise. 

2) That expanded userbase has saved money on entry, and may be more likely to spend money on in game purchases, and DLC expansions as result, provided they like your game.

3) The service provides something of a shield for smaller, and more experimental titles. The big games may draw the crowds, but they'll try some random stuff because hey...they can, and they might find that they enjoy these titles a great deal. Every game onto itself doesn't have to justify itself to some corporate overlord as a system selling property. It encourages more freedom on the part of developers.

4) Even the people that don't start out paying full value on the service, because they got access to it initially through various deals, are ultimately going to be very likely to stick around, even at full price, if you show them that there's continued value to be had in the service. Even if they scoop up long periods of membership on discount, that at least means you're locking them into your ecosystem for said period, which is incredibly valuable on it's own.

I could go on, but I'll leave it at that. At any rate, I'll just say again, if you think Sony won't move in the same direction here soon enough, you're vastly mistaken in my opinion. I'll just leave it at that.

Its actually a very bad point. Because it's not taking all the associated costs of a subscription model into consideration.

Lets be generous here. Let's say Gamepass has a sub-base of 40M people today. And let's say those people are paying $9.99/month. Thats Thats a whopping $4.8B!!!

But here's the catch. How much of that is spent to just keep the service active worldwide? Lets be nice again and say MS spends $800M on operational costs every year. So they have $4B left.

Now let's start talking about deals. The only way that service gets that good is if people see and know they get all AAA games day 1 on the service. So sets take one such game for instance. GTA6. Now rockstar knows their game can sell as much as 50M copies. At full price and that's $3B in revenue. BUt they also know that making that game available on gamepass on day 1 would cripple those sales. How much do you think they would be willing to deal with MS to get the game on there on day 1? $500M? $1B? $1.5B? 

Now do the same for every other major AAA game released for every calendar year. Granted, not all of them would command the kinda deal GTA6 could, but they would all be asking for well over $200M each. And any game that can or could have sold more would be asking for more. Why do you think Netflix spends so much on making Netflix original content, and mind you, Netflix business model has them putting up content from third parties long after their TV rotation or theatrical release. And even then its not viable for them.

Don't know if they are doing the right thing releasing most of their AAA games on GP. It's wonderful for consumers of course but from business point of view it's a bit more blur. If games sales were more front-loaded like DVD/BD or albums it would make perfect sense, after some months the sales decrease and never recover again, it's just that game sales works differently as some titles enjoy evergreen sales as long the console is alive (like GTA V) and releasing it on GP can severely hurt its sales

You missed his point. The point is that games that go to GamePass on day one don't get more money from the people already subscribed. They get the game without having to shell any more money. While on PS+, those new games won't be available on the service for quite some time, so they're going to sell at full price for a while, making much more money than a game releasing on GamePass. GamePass is 60 bucks a year. How many of that money goes to MS for those games, compared to what goes to all the third parties that have games on the service? 

I think it makes perfect sense for Microsoft and Sony because their games typically ARE extremely front loaded. That’s why you’re seeing a push like this from both of them. Now Nintendo, it makes perfect sense for them to stick to selling their games because they can sell them for $60 forever. Meanwhile even they offer a GamePass type service but it’s all classic games that they don’t make revenue off of anymore anyway.

GTA V is a huge exception to how games usually sell. But even that has come onto GamePass and PS Now. RDR2 is on GamePass right now. It still retails for $40, but Rockstar probably thinks they can offset potential lost sales with micro transactions for RDR Online. 

It doesn’t make sense for every third party publisher but it does for plenty.

Where did you get this operational costs though?

About your rant... I wasn't even talking about any that, I was talking about profit margin. Subscription have a bigger profit margin because there is much less costs involved than in a retail market unless it's a fully digital market

where does the logic come from if a game is in gamepass it doesn't sell outside of gamepass?

whats more buyer friendly?

It can sell, just with a smaller market

If you have a user base of 50 million users and 10 million subscribers on GP and the game is on GP, then your retail market is the 40 million non-subscribers 

Yes some hardcore fans will buy the physical copy for collection purposes of course, but those fans are more likely to have already bought the game when it came out, unless they became fans after played the game for the first time in the GP

Then your understanding is wrong. MS doesn't directly keep all the money they make from gamepads subscription, as that money is used to keep the service running and und deals for new content. And to be specific, this isn't even MS... its Xbox division.

Good you said this. If that is the case, then it means the physical approach would always be better as that is where the biggest games (basically the games everyone wants to play) are released to first. That also means that by the time those games make their way to gamepass, say after 12-18 months, you can have them on deals with the physical releases. Basically, the way a service like gamepass grows is if its ubiquitous with regards to software. Not if its complimentary.

And whose problems this? Do you think these companies are doing a charity? You make a game. You sell that game, it only sells 10M copies. You make an average profit of $35 per game. You make a total of $350M in profit for your game. So in this utopian world of yours, you believe that the publisher would rather take a payout of $100M from MS instead because they want 40M people to have access to their game instead of the 10M people getting it up front?

And how much money does these smaller games make from the service? Like you are just throwing out a lot of theories but not actually crunching the numbers or looking at the details. Games aren't like movies or tV shows that typically have other revenue streams. Games primary revenue stream is from actual sales. 

They may get in by deals, but if they are going to stick around, it would only be for actual content. And if you are removing all major AAA releases from the equation as day 1 releases, what reason would they have to stick around?

I could go on too, but you are simply not looking at the whole picture. What you are doing is just pure confirmation bias. Massaging everything to fit a narrative. I have not said and never said that sony wouldn't do something like any of this.. hell they started it didn't they? I am just saying it would never become the primary means of doing business in gaming. And there is no edge or advantage here. These games would also eventually make their way to PS now, and i addition to the third party games sony would also have their first-party stuff that may even be deemed as more valuable to some. 

All I said at the start of this, was if MS were selling 10M copies of their first party games an had an install base of over 80M... you wouldn't be hearing all this game pas stuff. You, on the other hand, are trying to paint this picture that a subscription service for gaming is more viable and ultimately more profitable.That just isn't the case at all.

And think about if  both sony and MS has the exact same third-party games available on such a streaming service, then the only thing that would differentiate them are the exclusives. And what stops EA, Ubisoft, Rockstar, Stadia, Amazon, Activision, Steam, Epic...from making their own subscription services? Mehn... people ought to be careful what they wish for. 

Look at what's happening to Netflix, bleeding content left and right and every one and their dog starting their own streaming service instead. What went from a pay $10 a month and get all you could wanthas become a, if you want to watch everything pay $40 a month to subscribe to 4 different services.