What about the 1st party games? Well, there is still work to be done. With Xbox now having 22 1st party studios(23 if you count XGP), they out number any other console maker by a wide margin, but it hasn't shown yet. With Halo Infinite delayed, Gears Tactics was the only 1st party game to play at launch, and there hasn't been much since then except for a few 3rd party exclusives. But for those who have a Series X|S, most will agree Game Pass has filled that void for now. With that said, It's only a matter of time before the games start dropping, and once they do, it's going to be hard for consumers to overlook.
At the end of the day this is what really matters. MS having this large number of studios at their disposal doesn't mean much until they start releasing quality games in a timely manner. But until we can get an idea of the consistency of releases and quality, it's difficult to gauge what effect their acquisitions are going to have on the brand over the course of the gen.
All three major hardware makers have decided to focus on different areas. All of them are seeing success one way or another. At the end of the day, if the innovation of GamePass is what ultimately decides for you that MS is making the better moves then what they are doing is working.