You said that Nintendo's the true biggest competitor. This is not a very common perception and not pretty obvious. When the console market is analysed, even by professionals, is always in terms of Xbox vs PS.

Nintendo is getting far different than Sony and MS since GC. With Switch, what Nintendo is selling is totally different than current gen consoles.

If we consider every platform that sell games a competitor. Yes, Nintendo, Google, Apple, Steam, etc are in the game. However, in terms of current generation classic console with the standard 3rd party library, there are only two choices: Playstation and Xbox.

It's obvious to see that Playstation owners might also buy Nintendo, Apple, Android, Google, Steam games. The same for Xbox owners. But Xbox owners usually don't buy PS and vice versa. So they're directing competing for the same audience. That's how they're each other's biggest competitors. Nintendo is a competitor, but not really the biggest competitor.

In terms of game sales business, we have Apple, Google, Android, Sony, Microsoft, Nintendo, Steam, Ubisoft own subscription, etc. All competitors, true. But it's no surprise that when the analysis is about PS and Xbox, the other ones, like Google or Nintendo, are left out. Xbox is the only device that can directly impact PS sales and vice versa.

Switch is a gaming console in formal sense, but it's actually something else in terms of library and technology. You can convince anyone to buy a Switch, but it's tough to convince a Xbox owner to buy a PS and vice versa. That explains why they focus so much on each other. They're each other's main threat.

GamePass have 11million subscribers? PS Now has like 2 million, but not to mention PS + has 42 million subscribers. Meanwhile Microsoft is too shy/ashamed to announce their Xboxlive subscriber numbers. 

In business the perception is very rarely the reality.  I remember watching a talk by Peter Thiel (Paypal cofounder) where he said every business in a highly competitive field is pretending to be a monopoly.  Meanwhile every monopoly is pretending to be in a highly competitive field.  One example he gave was Google, which has a monopoly on search engines, so they portray themselves as an advertising platform.  So many businesses are trying to misrepresent the reality, and sometimes the other "players" like analysts and journalists are actually doubling as marketers.

So the reality for gaming is that Nintendo and Sony are the two biggest players and both of these companies realize it even if they don't let on.  Microsoft is a significant player, but they've never had success in gaming anywhere near the other two.  How many generations has Microsoft won?  Zero.  Have they ever had a handheld system?  Nope.  They are, at best, as significant as Sega in their prime, but even Sega had a handheld system.

Meanwhile both Nintendo and Sony have a track record worth talking about.  Nintendo has won 50% of home generations that they were in (NES, SNES, Wii).  They've won 100% of handheld generations.  That's a very impressive track record.  Sony has won 75% of home generations that they were in (PS1, PS2, PS4), but they've won 0% of handheld generations.  Also, Sony successfully defeated Sega permanently in the home console market and that is like double points when you defeat a competitor for good.  However, Nintendo defeated Sony permanently in the handheld console market and that is again, like a double win.  Nintendo is the most dominant player in the video game industry, but Sony is a very worthy competitor.

Meanwhile, the perception is that Sony and Microsoft are the big players and Nintendo is this quirky little company doing it's own thing.  Nothing is further from the truth.  Microsoft is actually the one trying the weird, quirky strategies because they are trying to move all of gaming online.  They tried doing it at XB1 launch and they are trying it again with Gamepass.  Microsoft is very good about controlling the messaging on the internet, but they aren't so hot at actually understanding gaming, so I expect Gamepass to be another failed experiment.  However, Nintendo permanently defeated Sony in the handheld market, and then they launched the Switch.  The Switch, being a hybrid, means they can make a handheld device that also invades the home market.  That is the real threat to Sony.  It isn't Gamepass.  It's the Switch.

People think that Nintendo hasn't been competing with Sony and Microsoft since the Wii, but that begs a question.  "Why did Sony and Microsoft make motion control devices?"  It's because they considered themselves to be directly competing with Nintendo, even in the Wii era.  Nintendo doesn't make and market keyboard and mouse controls to compete with Steam, yet Sony and Microsoft did make and market motion controls to compete with Nintendo.  These 3 console makers all consider themselves competitors, but they also try to portray something very different to the rest of us.

Hopefully they just continue to do what they've been doing which has lead to them doubling the hardware sales of the competition. I don't want or need a netflix like gaming service. I can continue to just buy the games I want and not buy the games I dont want.

If Sony needs to respond to Gamepass that isn`t really something hard to do, they have bigger userbase, more noteworthy exclusives, at least as good relationship with devs. So putting a selection of games available through subscription wouldn`t take then long to make. Will they do it? I don`t think so, but if Gamepass gets to much traction or impacts PS5 sales to much Sony could do copy and paste improving or not the concept.
Would be a little harder to compete with it put together with XCloud, but since PSNow already exists it would be a matter of improving it.

Two curious things, the suggestion that devs pay to be on gamepass (seem this throw in one thread) or that they offer to put it for free on GP to get publicity (done here), last I heard publishers liked to receive for people to play their games not to pay for MS to profit from it.

Another curiosity is Gamepass have like 100 games on it? In 6 years of PS+ I have received at least more than 100 games permanently (considering my library says I have over 350 digital games and certainly didn`t buy more than 50, that is actually 300 tiles received some way or another without paying for it specifically). So PS+ and PSNow already do most of what GP offers.

They give a MAU or total XBL subs, which was lower than PS+ the last time we saw.

If the gameindustry as a whole becomes a controlled environment like gamepass then wouldnt that be dangerous for devs that want to stay independent and would it not influence the amount of investment being put in exclusives?
And like with Netflix that overall did lower in quality pretty fast after gaining a huge marketshare of the movie/series streaming platform,recently they start to put more effort in the netflix originals again because of the competition but would that happen without competition?

Ofcourse atm gamepass seems like a good deal but it does worry me about what it can become.

I haven't thought about that before. Being loyal to Sony has also gave me tons of brilliant big games. And it's full ownership.

Nintendo on the other hand is the one that should be asked how they will respond? Not that they need to respond, but Nintendo ownership is truly the most expensive affair of the big 3 and I don't know of any loyalty/subscription on Nintendo that really gives out good stuff.

I was checking the prices of Zelda switch agains games like Horizon, God of War and many others and it is a shame how pricey Zelda is. The excuse some give me is always that Nintendo makes quality games that deserve the long term high price - it's like God of War and co are not quality games.