Microsoft has announced it’s developing a free version of Xbox Cloud Gaming. This service, currently being tested, will be supported by ads and will let people stream games without needing a Game Pass subscription – making it Microsoft’s first standalone game streaming option.
Microsoft first introduced its game streaming service, xCloud, as a beta in November 2019. Before its official launch in September 2020, it was renamed Xbox Cloud Gaming. Originally available only to Xbox Game Pass Ultimate subscribers, Xbox Cloud Gaming became accessible to all Game Pass tiers (excluding the PC plan) in August 2025.
Microsoft Confirms Ad-Supported Game Streaming Test
Microsoft is exploring a new way to expand its gaming service by testing a free version supported by advertisements. A company representative confirmed to The New York Times that they are internally testing this ad-supported platform. This news follows a recent report from The Verge, which indicated that some Microsoft employees had access to an ad-supported Xbox Cloud Gaming option as early as October 2025.
So, Microsoft isn’t saying much about what they’re testing right now, and honestly, I’m not sure how long this internal trial will even last. It’s cool they’re looking into a free gaming option, but it’s not a guarantee we’ll actually get one. They’ve floated ideas like this before. Remember back in late 2023 when the Xbox CFO hinted at a Game Pass with ads? That never actually came to fruition, so I’m trying not to get my hopes up too much.
Is a Free Game Streaming Service Commercially Viable?
Leaked Microsoft documents related to the Activision Blizzard acquisition reveal that running Xbox Cloud Gaming costs about three cents per hour to stream games at 1080p resolution and 60 frames per second. This calculation is based on using customized Xbox Series X consoles set to run like Series S models, which power the xCloud service. Since then, the service has added support for higher-resolution 1440p streaming, which increases costs due to the greater bandwidth needed.
Ad-Supported Xbox Cloud Gaming Tier Viability Scenarios
| Scenario | CPM | Ads/hr | Revenue/hr | Margin* |
|---|---|---|---|---|
| Conservative | $2 | 3 | $0.006 | -80% |
| Balanced | $8 | 3 | $0.024 | -20% |
| Optimistic | $12 | 3 | $0.036 | 20% |
| Aggressive | $20 | 4 | $0.08 | 167% |
*$0.03 cost per hour for 1080/60fps cloud gaming assumed.
A recent Statista study from November 2023 showed that social media advertising costs between $1.20 and $7.17 for every 1,000 views, varying by platform and target audience. Because of these costs, a free, ad-supported version of Xbox Cloud Gaming probably wouldn’t make a profit right away unless Microsoft could charge advertisers a much higher rate than average. This could happen if Microsoft could prove it offers access to a very active and engaged audience. If this type of free plan is introduced, it’s more likely a move to grow the service’s reach rather than a way to make money immediately. The service would also allow players to use games they already own, a feature Xbox Cloud Gaming has offered since late 2024, and would function separately from the existing Game Pass subscription.
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2025-10-25 19:04