They aren't the only ones who've done that. ;)

Its the business model for the gaming industry but who actually started this moneyhat situation.  Was it Sony when they first entered into the industry or was it before that,  Not sure.  The only reason MS does not go down this route is that its cost prohibitive.  Meaning what they get from trying to secure 3rd party games from Sony cost way to much for the actual benefit which is small if not nothing at all.  I believe the securing 3rd party content from other platforms is only good if both parties are either even in marketshare or not to far from each other.  Once one gets to far ahead, the its way more effective for the market leader.  Also it seems MS strategy now is to push more towards getting games day one on GP which I believe has a better avenue for their money as it geared towards adding value to GP then trying to stifle a game from their competitor.

I'd easily bet that was long before Sony entered. Nintendo was notorious for stuff of that ilk in the 8-bit days, which trickled into the early 16-bit days. You could even read about stuff like it in magazines of that time. 

Regarding Game Pass, agreed!

Yes, the practice can be found all the way back to the Atari 2600.

Here's a good read on the subject.

It's worth noting PS seems to have been the one that greatly upped the ante with this practice :

The next generation is where timed exclusives really became a major component of a company's strategy. The Sony Playstation, Sega Saturn, and Nintendo 64 were the first consoles designed to produce primarily 3D polygon graphics. Sony wanted games to show off the power of the Playstation, and they found several. Ridge Racer, Wipeout, Battle Arena Toshinden, and Destruction Derby were technically impressive (for the time), pick up and play games that really proved that the next generation had arrived, so Sony locked up timed exclusivity deals for those four games. Those games played a major role in PS1's early success. In later years, Sony would buy timed exclusivity for the extremely popular Resident Evil series, further cementing PS1's place as the go to game console of the era.

The PS2/Xbox/Gamecube generation saw one of the biggest timed exclusive deals of all time. Sony purchased the rights for the Grand Theft Auto series games, starting with GTA III. GTA III and GTA: Vice City are among the best selling PS2 games of all time, and Sony's timed exclusive deals put a stranglehold on the competition. GTA: San Andreas would later be a simultaneous multi-platform release, but by that time, the console race was over.

However, this is only for timed Exclusive practice, Nintendo policies were so strict that many games were simply exclusive as a result. So you can say that by changing the playing field on this, Sony actually improved the situation XD(though it might have more to do with court challenges over Nintendo's practice than actually Sony's practice's direct impact).

Nonetheless to me, it's only business, timed exclusive/exclusive are in the end used with the main goal for one to better their offering not to actually remove something from the competition even though it's still a consequence. In the end, it still has the effect to increase investment in the industry and we might have a different gaming landscape if it were not for this practice.

I might find an issue with this if:

1) One used a dominant position to use this practice extensively. (Sony used it often but nowhere near the point I would find issue with)

2) One actor, even without a dominant position, would use this practice almost systematically to the point it decreases the competitive nature of the market. (it never was the case in this industry IMO, however, there are other industries where actors have done or try to do so (some actors in the drugs industry were extensively buying every drug IPs they could to then dramatically rise the price of the related products for the consumer), so not impossible that it may happen in the Video game industry though would be much more difficult to achieve)

3) Exclusivity was made to foreclose explicitly 1 rival or 1 rival product. (There's only a rumor of this at the moment and no actual proof, and if there were evidence of it it should have transpired in the FTC court case, it did not.)

Ubisoft sees the deal as a good thing to validate their own move towards mobile
https://www.eurogamer.net/microsofts-acquisition-of-activision-blizzard-is-good-news-says-ubisoft-ceo

"I think it's good news that the transaction can go through because it's really showing the power of IPs and where the industry is going. So, there will be lots of opportunities in the future for all the companies," Guillemot replied.

"It's also showing the value of IPs that can be now on console and PC, but also mobile, and become more worldwide brands - and when we say worldwide it's really everywhere in the world - and that's a fantastic opportunity."

He continued: "Microsoft is saying that the mobile part of the Activision deal is important, so all the investment we are making to be stronger on mobile is also in line with that, so all those elements will help the value of the company to grow."

Good if you like your favorite IPs to be turned into mobile spin offs...

We are already seeing positive changes because of the deal such as old CoD servers turned back on, ABK games coming to steam. Eventually their games will be on Game Pass. From a personal stand point, it's good for me. In the grand scheme of it all, I don't see it as a good or bad thing for industry. No matter how many times the term monopoly gets thrown around, MS is not even close to it in any of the varies gaming markets, let along the entire gaming market. It would take a hell of a lot more purchasing to get close to a monopoly. If anything, the evidence points to this purchase creating better competition.

Just think about it this way, King makes more money they all of Activision, that says alot about mobile.  Any game company ignoring that market would be foolish.  The thing is, console and PC games do not always translate over to mobile which is something MS already recognize. The customer base for Mobile games are different and while GP is a good platform to extend the reach XCloud to mobile, it really only appeal to console/PC gamers who occasionally play away from home.  I do not see many companies trying to port their existing games over to mobile as much as they need to just develop specific games for the platform.