Microsoft eyes free Xbox Cloud Gaming tier backed by ads

After more than six years of experimentation, Microsoft’s cloud gaming ambitions are finally entering a new chapter. Earlier this week, Xbox Cloud Gaming—once known as Project xCloud—officially graduated from its beta phase. The milestone came just as Microsoft rolled out yet another price hike for its Game Pass service. With the change, Xbox Cloud Gaming is now available across all Game Pass subscription levels, meaning players no longer need to pay for the top-tier Game Pass Ultimate to stream their favorite titles. But Microsoft seems to be preparing an even bigger shift: a completely free, ad-supported version of Xbox Cloud Gaming.

According to a report by Tom Warren from The Verge, sources within Microsoft have disclosed that the company is currently testing a model that allows users to stream select games without a Game Pass subscription. The catch? Players must first watch a short, two-minute advertisement before their session begins. Early tests reportedly grant employees access to one-hour play sessions, capped at five per month. While these restrictions are part of internal testing, they may not reflect the final version intended for the public.

If successful, this move could mark a turning point for Microsoft’s gaming ecosystem. Until now, cloud streaming has been a premium feature tied to Game Pass Ultimate, which now costs $29.99 per month following the latest price adjustments. By introducing a free tier, Microsoft would be opening the door for millions of new users who might be curious about cloud gaming but hesitant to commit financially. This strategy mirrors the ad-supported models used by other digital entertainment platforms, from YouTube to Netflix, offering accessibility at the cost of a few commercial interruptions.

Currently, Game Pass subscribers can stream games directly from Microsoft’s vast catalog or from titles they already own digitally. If Microsoft removes the Game Pass requirement entirely, the experience could resemble what Nvidia offers with its GeForce NOW service. Players could stream games they already own, tap into time-limited trials from the Free Play Days program, or revisit older favorites from the Xbox Retro Classics lineup—all without paying for an ongoing subscription.

The company reportedly plans to launch public trials of this ad-supported cloud tier in the coming months. Early availability is expected across multiple platforms, including Windows PCs, Xbox consoles, handheld devices, and web browsers. This broad rollout would reinforce Microsoft’s cross-platform strategy, emphasizing flexibility and accessibility rather than hardware exclusivity.

The timing of this development is no coincidence. Microsoft has been under pressure from its gaming community after the latest Game Pass price increase, which sparked a wave of frustration among players. Although some retailers, such as Amazon, are still offering Game Pass subscriptions at the old price, the backlash highlights the delicate balance Microsoft must strike between profitability and player satisfaction. By introducing a free option, the company may be seeking to rebuild goodwill while continuing to expand its cloud infrastructure.

From a business perspective, the ad-supported approach serves multiple purposes. It reduces the barrier to entry for new users, encourages broader engagement across Microsoft’s ecosystem, and opens up a fresh revenue stream through advertising partnerships. For advertisers, the prospect of reaching a global audience of gamers—an audience that spends hours interacting with digital media—presents an attractive opportunity. For players, meanwhile, it’s a trade-off: watch a short ad in exchange for an hour of free cloud gaming.