If the games are good it'll work.
If the games are mediocre it won't work.
This is absolutely the right answer.
I personally think the best case-study in this approach could be Ghost of Tsushima. No, Ghost is not a service game, but I am finding its approach to episodic content quite enjoyable. Most of the "side-missions" are 1-4 hours including travel time. I am finding them incredibly digestible in one or two gaming session. You usually end up doing two or three missions, spend a bit of time exploring the open-world during travel time, and stumble upon smaller activities like fox dens, and get to see the beginning and end of a contained story.
Episodic content could be great for an open-world Halo game, but the quality has to be there AND it needs to have a complete "main story" that tells a meaty, compelling story with a definitive end that is available at launch. I personally find something in the ten to twelve hour range to be my personal "sweet spot," but I'm sure many would disagree because this is the internet. Dropping a new "episode" every month or two that contains a two-four hour, self-contained story would be incredible. Maybe one month it will be a new area that was designed specifically for that episode, maybe the next month it's a different way of looking at an area you've already visited. The possibilities are endless. Players that wanted even more Halo could also supplement the episodic content with things like multiplayer, firefight, and forge in between story drops. 343 could also provide updates and events to the non-story modes as well.
It starts to become an issue if things like firefight are missing at launch and added later as the "service content." I don't want to see Microsoft not releasing feature-complete titles or holding back game modes or significant content indicative of traditional releases for later release as part of a "service game."
Avengers seems to be taking a very similar approach with its "War Table" approach to content. There's a story with dedicated, single-player story missions, but also a ton of other content options like co-op missions, training challenges, and other ways to enjoy the game. I was originally skeptical of this approach, but it actually looks very promising. The only thing I would really like to see added is an "estimated time to complete" statistic on the War Table, so when I hop into a session, I can better choose content that matches my time available to play. This kind of more precise gameplay session planning will only be heightened by things like xCloud and the SSDs of next-generation consoles, which will get us in the game and playing faster than ever.
It gets even more exciting when you begin to think about service games in the context of Xbox GamePass. What if Microsoft leveraged the technology it's using to suspend save states to make this new episodic content available instantly? Picture this: You go to the GamePass section and see a dashboard of new episodic content available in all first-party and third-party games. Let's say this is a pretty solid month, so you see a new episode from Halo (estimated to take two to four hours), a new series of races in Forza Horizon 5 (estimated to take one hour), a new episode from Everwild (estimated to take three hours), a new event for Gears 5 multiplayer (estimated to take ten minutes per match), and a new Battletoads challenge from Rare Replay that immediately launches into the motorcycle section of Battletoads to see if you've still got the skills (estimate to take three minutes). If you're playing on xCloud that content is loaded up exactly in that spot (using a universal "suspended save") and on the next-gen consoles, it loads in a few seconds using the SSD and you're immediately into the action. Hopping onto xCloud for your ride home on the bus? Hop in and see if you can tackle Battletoads. Home in front of your nice TV on your Series X with a few hours for a longer session? Take your pick of the new Halo or Everwild episodes or try a compelling new indie that hit GamePass.
I think if Microsoft can look at it through a very consumer-friendly lens, and they've given us plenty of reasons in the past few years to think that they will, I think this could be an incredibly successful blueprint for them and for GamePass. As always, it will all come down to the quality.