The situation is actually even worse for City, who are not doing at all well in the Premier League and are already 12 points behind Liverpool.
Manchester City situation is not too bad in Premier League as they have good opportunity to have a position in top four. It's clearly that their probability to defend Premier League title now is too low, nearly zero but it is not their main target as they know with 12 points less than Liverpool, it's more realistic to think of top four only.
In Champions League, with a loss to PSG in Paris, they are in very dangerous situation now and at verge of failling after group phase. They must win the last match to go next, and 3 points are like a mandatory task for them.
What you see with Bayern has been evident throughout the Champions League season so far: The big teams are losing games that they wouldn't normally lose. I don't think it's because of the new game mode (why would it be), but I have to say that I really like it and the “group stage” of the Champions League is much more exciting than usual this year. So I hope they keep this mode.
It is not normal with a big club like Bayern Munich but it's group phase only, and with the last match Bayern Munich can appear in top 8 too. It's better if they did not lose the latest match to secure a position in top 8, but chance is opened for them.
If Bayern Munich have to play playoff matches, they will have risk of meeting some big clubs like Juventus, PSG and Manchester City. I believe Bayern Munich don't want to join playoff matches and never want to meet either Juventus, PSG or Manchester City too early.
https://www.uefa.com/uefachampionsleague/standings/