The video game industry has been through cycles like this before. One of them (the 1983 crash) was so bad it killed most American companies and caused the momentum to shift to Japan for a generation. Another one I can recall is the "death" of the RTS (real-time strategy) genre around 2010. They have all followed a fairly similar pattern and in none of them that I know of have things played out as the companies involved thought or hoped they would.
Thankfully, RTS is healthy again! (To your point about cycles)
I worked in the video game industry from the 90s through to today. I think you are over generalizing or missing the original point. It's true that there have been boom and busts. But there are also structural changes. Do you remember CD-ROMs? Steam and the iPhone were structural changes.
What Microsoft is trying to do with Gamepass is a structural change. It may not work out the way that they plan but the truth is that sometimes these things do change the nature of the games you play.