I don't see how they're making money from it, but holy shit has it turned into a great service. Getting all the Final Fantasy, Kingdom Hearts and Yakuza 0 + Kiwami 1/2 on it couldn't have been cheap.
Outer Worlds is one of the best games I've played this year and it only cost me a buck to do so. I've gotten to try out so many new games that I had some interest in but not enough interest in to actually buy like Remnant, DMC5, Outer Wilds, Metro Exodus, Rage 2, World War Z, Jump Force, etc. It also has a lot of older games I'm replaying like Metal Gear Solid HD Collection, Saints Row The Third, Fallout NV and Mass Effect.
When they first launched the service I thought it was a joke and looked like something I would never subscribe to. Now it is changing my video game buying habits. Unless it's a Sony or Nintendo game, or a Rockstar or CDPR game why would I buy any other games now knowing they will probably end up on game pass within a year?