Microsoft gets its head back in the Xbox cloud

Xbox Cloud Gaming is back in the headlines, and it looks like there’s a lot more to come.

by Tom Warren

Oct 17, 2024, 4:00 PM UTC

Illustration of Xbox logos on phones and tablets

Illustration by Alex Castro / The Verge

Tom Warren is a senior correspondent and author of Notepad, who has been covering all things Microsoft, PC, and tech for over 20 years.

When Microsoft first started discussing its gaming cloud division in 2018, it had grand plans for the future of Xbox. “We believe there is going to be 2 billion gamers in the world, and our goal is to reach every one of them,” former xCloud chief Kareem Choudhry said in an interview with The Verge at the time. Microsoft wanted to use cloud gaming to reach potential Xbox players in emerging markets and the millions of mobile players who could stream Xbox games to their phones.

More than six years into building its cloud gaming vision, Microsoft is still far from its ambitious goal.

A world full of people streaming Xbox games to their devices still feels like years, if not decades, away. Microsoft hasn’t managed to break through on mobile, cloud gaming remains tied to a pricey Game Pass Ultimate subscription, and the visual quality and latency of Xbox streams is far behind the competition. But for all the hurdles, Microsoft isn’t giving up.

I reported late last week that you’ll be able to start streaming some of your own games on Xbox Cloud Gaming in November. Eventually, you’ll also be able to buy an Xbox game and instantly stream it to your Android device, thanks to a US court ruling that forces Google to stop requiring Google Play Billing for apps in the Play Store on November 1st. Google wants an emergency stay on the ruling, claiming it’s supposedly “dangerous.”

And there’s more to come — Microsoft is working on direct-to-cloud controllers, more cloud gaming features, and improvements to the visual quality of streams.

Microsoft’s cloud gaming mobile battles

The potential Android store changes highlight Microsoft’s struggles with Xbox Cloud Gaming, as the company continues to battle the strict app store rules that prevent mobile cloud gaming from becoming a reality.

Inside Microsoft in 2021, the company set targets for Xbox Game Pass subscriptions to hit 100 million by 2030, fueled by expected growth in mobile and Xbox Series S / X sales. The growth from mobile hasn’t materialized yet, largely because Microsoft hasn’t managed to get Xbox Cloud Gaming into an app on iPhones and iPads.

Both Google and Apple’s app store restrictions stopped Microsoft from shipping the cloud gaming app it really wanted and would have meant sacrificing Xbox Game Pass revenues. While some of the walls of the Android store might be about to come down, Microsoft is still battling to get the same results on iOS. Apple has eased some of its restrictions, but Microsoft argues the changes don’t go far enough to allow it to bring Xbox Cloud Gaming to Apple’s App Store. Nvidia’s in the same boat, having still not launched its own native cloud gaming app on iOS.

Microsoft was banking on that mobile growth to make Xbox Cloud Gaming a bigger success story. The company sacrificed Xbox Series X sales for its “long term ambition” in the cloud, holding back console chips to build its data centers with the latest Xbox hardware. Months ahead of the Xbox Series X / S launch in 2020, Microsoft’s Xbox chief Phil Spencer even claimed that Amazon and Google were “the main competitors” for Xbox, instead of Sony and Nintendo.

The service was originally unveiled as Project xCloud in 2018, just a week after Google publicly announced its own plans for a game streaming service. Microsoft, having talked up its cloud gaming efforts months earlier, was suddenly in a race with Google to make them a reality. Google then beat Microsoft with a Stadia launch in 2019.

Four years on, Amazon’s Luna game streaming service has been plodding along with little fanfare, and Google shuttered its Stadia service last year. While Microsoft hasn’t suffered as heavily as Google, it’s clear that the market isn’t as interested in cloud gaming as the Xbox maker had hoped. That’s led to some strategy changes that are part of a continued shakeup of Microsoft’s gaming business amid the giant Activision Blizzard acquisition.

Leadership and xCloud changes

Two of the executives leading Microsoft’s cloud gaming push are no longer at Xbox. Former Xbox Cloud Gaming chief Kareem Choudhry left Microsoft earlier this year, after more than 26 years at the company. Choudhry worked alongside Catherine Gluckstein on xCloud, who recently moved from the Xbox side to become chief operating officer at King — a game developer that Microsoft acquired as part of its Activision Blizzard deal.

Microsoft aggressively expanded to new markets for cloud gaming throughout 2022 and then slowed down as regulators probed its Activision Blizzard acquisition. Microsoft even had to cut a special deal with Ubisoft to give up cloud gaming licensing rights to get the deal over the line. Xbox president Sarah Bond revealed the company had cost issues with cloud gaming last year, and Microsoft canceled plans for a cloud gaming console.

The focus is now on turning TVs into cloud gaming machines. An Xbox TV app launched for Amazon’s Fire TV sticks over the summer, and Microsoft promoted it with “no console required” messaging. Xbox Cloud Gaming also appeared on Meta’s Quest VR headsets last year, and the platform has gained mouse and keyboard support and an Xbox dashboard-like interface on the web in recent months.

Cloud gaming on TVs highlights how Microsoft’s underlying technology hasn’t progressed enough compared to competitors, though. Microsoft upgraded its data centers to custom Xbox Series X hardware in 2021, but Xbox Cloud Gaming is still limited to 1080p and low bitrates that don’t look great on a 4K TV. Nvidia offers RTX 4080 levels of performance and great-looking visuals and latency with GeForce Now. It’s a service that really shows the potential for cloud gaming. Nvidia is far ahead of Microsoft because it’s using more powerful PC hardware and has focused on reducing the latency that gamers complain about with cloud gaming.

The future of Xbox Cloud Gaming

Sources tell me that Microsoft is working on improving bitrates for Xbox Cloud Gaming that should come soon, but seriously improving latency levels to compete with GeForce Now will require more powerful hardware.

Microsoft had been planning to stream PC games over the cloud in 2021, according to internal emails from the FTC v. Microsoft case. It’s not clear if that’s ever going to happen, though. The same FTC case also revealed that Microsoft was working on a separate dedicated version of Xbox Cloud Gaming that wasn’t tied to Game Pass, but the costs and popularity of the cloud gaming service made Microsoft put the plans on hold.

There are signs that Microsoft is building other features for Xbox Cloud Gaming, though. The developer behind Better xCloud recently discovered references to direct-to-cloud controller support and an “Xbox Together” feature where you hang out and play games in a browser with friends. Sources tell me the Xbox Together feature was just a hackathon project that likely won’t see the light of day, but the cloud controller support is being actively worked on.

After going quiet on Xbox Cloud Gaming during the Activision Blizzard acquisition, it feels like Microsoft has its head firmly back in the Xbox cloud. Between the TV push, intense server work to let you stream your own Xbox games through the cloud, and new features, the future of Xbox Cloud Gaming suddenly looks interesting again.

The pad:

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Thanks for subscribing and reading to the very end. What are you hoping to see in Windows 12? You can reach me via email at notepad@theverge.com.

If you’ve heard about any of Microsoft’s other secret projects, you can also speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram if you’d prefer to chat there.

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