Xbox Unveils Ad-Supported Cloud Gaming Trial for Free Game Streaming Enthusiasts
Microsoft has announced it is in the process of testing a free tier for Xbox Cloud Gaming, featuring an ad-supported model. This initiative marks a significant shift, as it will be the first version of the platform that operates independently of the Game Pass subscription service.
Background on Xbox Cloud Gaming
Initially launched as xCloud in November 2019, the platform was rebranded as Xbox Cloud Gaming before its official debut in September 2020. Originally exclusive to Xbox Game Pass Ultimate members, it became widely accessible to all Game Pass tiers, except for the PC plan, in August 2025.
Testing the Ad-Supported Model
A company representative confirmed that Microsoft is internally testing this new free option. This aligns with a report from The Verge, which indicated that some Microsoft employees gained access to the ad-supported tier as of early October 2025.
No specific time frame for the trial has been provided, and it remains uncertain whether this test will transition to a public version. Microsoft has previously explored free gaming services; however, those initiatives have not yet resulted in consumer offerings.
Challenges of Commercial Viability
Documents from recent legal proceedings involving Microsoft and the FTC revealed the financial aspects of running Xbox Cloud Gaming. The estimated operational cost is approximately $0.03 per hour for delivering 60 frames per second in 1080p resolution.
Costs increase with higher streaming resolutions. The following scenarios illustrate potential ad revenue based on various cost per mille (CPM) rates:
| Scenario | CPM ($) | 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% |
To achieve profitability, Microsoft would need to secure a substantial CPM from advertisers. This potential service is anticipated to focus on leveraging the existing audience of Xbox Cloud Gaming.
Future Outlook
If the freemium model is successfully implemented, it may serve more as a strategic move to broaden market reach rather than a quick route to financial gains. By operating separately from Game Pass, the new service would emphasize its “bring-your-own-game” functionality that has been a part of Xbox Cloud Gaming since late 2024.
