Microsoft GamePass was serious competition and they ruined it, for now. They had managed to build a system where there was no reason for folks not to buy in, people got nearly unlimited games and then often paid for DLC and cash shop items for games they didn’t even own. It was converting the average gaming market to an a la cart style cash shop which as much as 2010 me would consider this offensive, today it is often better for gamers without money.
The only other thing that would seriously compete with Steam would be a marketplace that had tradeable games but I think the game makers don’t want this so no developer would sign up for it.
Itch.io exists and it does a fantastic niche gaming distribution job so I don’t see how a new competitor can do better than what is already out there.
The fact that they have made terrible business choices doesn’t mean it is impossible to make good one.
The subscription model is not for driving positive revenue it is to smooth out investor concerns. You have steady revenue streams to reassure that your market is stable so you don’t suffer as hard when you drop a Redfall.
The big issue is massive failure of handling day 1 releases. They made it TOO good of a deal. It probably is a corporate structure issue where the division owning game pass was able to sacrifice a neighboring divisions revenue so they could get good metrics.