Microsoft Plans Free, Ad-Supported Xbox Cloud Gaming Service

• Microsoft is testing a free, ad-supported Xbox Cloud Gaming tier that won’t need a Game Pass subscription.
• Players may see two minutes of ads before play and receive up to five hours of free streaming each month.
• The rollout follows the Game Pass Ultimate price hike to $29.99 USD/month, sparking debate over Xbox’s long-term strategy.

Microsoft is preparing to introduce an advertising-supported version of its Xbox Cloud Gaming service that would be available without a Game Pass subscription, according to people familiar with the matter.

The free tier, currently in internal testing, would allow users to stream games across personal computers, Xbox consoles, handheld devices and web browsers after viewing approximately two minutes of advertisements, according to The Verge’s Tom Warren. The company is considering limiting sessions to one hour, with a monthly cap of five hours of free play, though these parameters could change before launch.

Pricing Tensions and Subscriber Perks Amid Xbox Price Hikes

The initiative comes as Microsoft faces intensifying questions about the economic viability of its Game Pass subscription service. The company recently raised prices for its premium tier. Game Pass Ultimate now costs $29.99 monthly, up from $19.99, representing a 50% increase that adds $120 to subscribers' annual costs.

To justify the higher pricing, Microsoft has expanded its content library and added partner benefits. The company projects approximately 75 day-one game releases annually and has incorporated Fortnite Crew and Ubisoft+ Classics into the Ultimate package. Xbox Cloud Gaming has also exited beta testing and received streaming quality improvements.

However, the company simultaneously eliminated a 10% discount on downloadable content for Game Pass subscribers, replacing it with a new rewards program. Microsoft said the $30 monthly fee reflects "the expanded catalog, new partner benefits, and upgraded cloud gaming experience."

The new pricing structure took effect Oct. 1 for new subscribers and will apply to existing customers beginning Nov. 4. Microsoft added more than 45 titles to Game Pass as part of the rollout, including "Hogwarts Legacy."

Industry Skepticism Mounts Around Game Pass

Game Pass faces growing scrutiny from industry veterans. Pete Hines, former senior vice president at Bethesda Softworks, recently questioned the service's long-term viability. His comments were endorsed by a former Microsoft executive who warned of "weird inner tensions" within the company's gaming strategy.

Raphael Colantonio, founder of Arkane Studios, characterized Game Pass as "an unsustainable model," suggesting Microsoft's substantial financial resources are masking underlying economic challenges that will eventually require reckoning.

Microsoft maintains that "creator participation" and "player engagement" have reached record levels, though the company declined to disclose updated subscriber figures. The division reported nearly $5 billion in Game Pass revenue over the past year, supported by releases including "The Elder Scrolls: Oblivion Remastered," "Doom: The Dark Ages" and "Indiana Jones and the Great Circle."

The price adjustments extend beyond subscriptions. Microsoft briefly tested $80 pricing for select holiday releases before reverting to the $70 industry standard. The company also raised Xbox console prices domestically, with premium hardware including the ROG Xbox Ally X priced at $999.99 and the standard ROG Xbox Ally at $599.99.