Oh, you know the profit made from Outriders? Also how much money Squeenix is getting for putting it on GamePass? Please share.

As for the OP, aren't most game sales digital already nowadays? You need more info to make any sort of compelling argument.

1. How many physical sales there were
2. How many digital sales there were
3. What is the PS/Xbox split in the UK

Also retailers really don't make much money on software sales, they make them on accessories and in most game retailers case, used games. That's why if you go into a US GameStop store nowadays it's probably 40% games and 60% accessories and overpriced pop culture trash.

For every $60 game sold,  The publisher (Square Enix) makes about $28-30 bucks (physical game) and much more by selling it digitally. 

So, if for example, let’s say, the total retail sales ATM WW for this game are 1 million, and the ratio remains the same compared to UK. 
830K copies are on PS consoles and 170K on Xbox consoles. 
That means that the publisher gets about $23.4 millions from PS consoles and about $4.76 millions from Xbox consoles.

How much do you reckon MS paid for having it day one on Gamepass? $1 million, 3 millions, 5 millions, 10 millions??

Also, The retailer (GameStop, Walmart, BB, etc) makes about 25% of the price or $15, so yes they are making some money by selling physical software. 

Really curious to know how those deals with gamepass works. Maybe they make a projection of sales and compensate the developer for a certain amount of "guaranteed" units?
Let's think this game would sell 2 million copies on Xbox on release, but ends selling only 1 million due to gamepass. That means the developer would lose probably around 40 USD per copy, or 40 million dollars in revenue. Anything less than that from microsoft would not make sense. Thats a lot of money for just one deal.

I can’t imagine any retailer has more bargaining power than Walmart and they make so little on software that they cut $10 off all games (except Sony games for some reason, I guess Sony has a rule against retailers pricing their games) and even Walmart only gets 10-13% which means on a $70 Sony title they’ll “profit” $13. Compared to huge markups they see on cables, cases, controllers, chargers, etc. Or in GameStops case, huge markup on used games.

Regarding profit vs GamePass, you proved my point. When you say we “know” one platform profited more than the other, you’re just guessing with no numbers to stand on. The biggest flaw in your argument is that we don’t know what method of monetization Squeenix has with Outriders. We know MS gives some publishers a big check upfront. Other get paid for time, others by download, and others a mixture of some/all of those. We don’t know how they get compensated.

quite sure its also one of the biggest games on steam rn

Not surprising. Who would choose to buy it when its free somewhere on the same platform. Question is only if they got paid enough to offset the ones not buying it anymore. This game is not getting a lot of praise, so maybe it would not have sold much to beging with. So it might be alright.

People always wanting to hate on Gamepass really annoy me. The program has saved me hundreds of dollars. It has allowed me to try and enjoy games I wouldn't have ever bought, and try and hate games I would have otherwise purchased regretfully. Microsoft is obviously paying these third parties well because if not, why would they put their games on Gamepass? And if MS is paying them well, then either they are making a lot of money off of an increasing subscriber base, or they are anticipating they will based on data they have collected so far. Gamepass is great for consumers, great for investors, great for developers. The only people I see hate on it are the ones who are obsessed with sales figures and treat them like they are everything. This is 2021 people, it's very much about subscription models, will one day be ALL about subscription models, and it will NEVER go back to ALL being about sales figures again.

Why spend $500-1000 a year on game purchases for games, 90% of them, you will never touch again? It's a silly waste of money for those of us buying digitally. I only spend $180 a year on Gamepass PC.

So as has been said there's a lot we don't know about the MS deal and also the digital sales to say anything concrete about profitability for Square Enix. 

As for profitability for retailers, it's no doubt that they're stuck in an unenviable situation. There is a reason that all those hedge funds opened so many short positions on Gamestop. But they'll absolutely keep stocking consoles of all descriptions for as long as they exist, because:

1) they bring people to the door of your shop. 

2) Retailers make a tiny commission on consoles really. They love to sell them to you bundled with all sorts of hats, extra peripherals to actually make some money from the operation. citation: Xbox Series X and Xbox Series S Consoles | GAME

3) Insofar as retailers have any strategic market power at all, they'd rather sell you the console than lose the business to another retailer. 

"Most of them showed up to buy a PS4," said one store executive who remained anonymous. "When we told them it was out of stock and explained to them what Game Pass is and how many games they get access to, they picked up a Series S instead."

Source

Seems to me that some retailers have no problem with Game Pass. 

Shows that many gamers got what they want with a service like Gamepass.