Sounds like the logical continuation of this saga is for MS to give up the hardware game

That's what Microsoft want to make people believe: "Poor Microsoft only selling proprietary platforms because those evil competitors would not let them onto their platform. Sony basically forced Microsoft to buy Activision Blizzard, commit only future Call of Duty to come to PlayStation at all, and reserving future installments of all other franchises to come out exclusively on Xbox and Windows. Microsoft really wants to release Diablo 5, Overwatch 3, etc. on PlayStation but because GamePass isn't available, their hands are tied."

Just look at Steam and Steam Deck: Steam allows subscription services. EA Play is available through Steam. On Steam Deck there is even the entirely vendor-neutral Flathub platform available through the pre-installed Discover store. Microsoft could release GamePass through there and even bundle a Proton-like compatibility layer based on actual Windows code. Microsoft doesn't do that because GamePass is meant to tie people into Microsoft platforms.