Going all-in on Gamepass has also devalued their own games in many consumers' minds. Why buy it when you can just get it on Gamepass? I suspect the recurring revenue is not making up for the lost unit sales within any reasonable timeframe.
They did try it, remember? During the Xbox One launch, there was a heavy marketing blitz to position it as a living room multimedia machine and console gamers absolutely tore them to pieces for it. They gave up after that debacle.
"I got an Xbox One!" "Oh, the first one?" "No, the XBox One not the original XBox 1."
Or, looking at the .NET evolution:
.NET Framework 4.8 .NET Core .NET Core 2 .NET Core 3 .NET 5
There is no .NET Core 4 because people would get confused with .NET Framework 4 which is still getting bug fixes and has support. And they wanted people to move from .NET Framework 4 so they called it .NET 5 instead of .NET Core 5.