Microsoft Tests Ad-Supported Xbox Cloud Gaming Tier

According to The Verge, Microsoft (MSFT, Financials) is trying out a new version of its Xbox Cloud Gaming service that would let people play without a Game Pass subscription. This version would be sponsored by ads.

Employees can stream some titles after seeing around two minutes of advertising during internal tests. Microsoft may change the constraints before the public debut, but for now, access is limited to one hour each session and five hours per month. With the free tier, users could stream games they already own, take part in "Free Play Days" on weekends, and access a library of old Xbox games.

The tests are happening at the same time as Microsoft's recent changes to its Game Pass levels. Xbox Cloud Gaming is now part of both the Premium and Essential plans. The Ultimate plan, on the other hand, went up in price by 50%. Game Pass Ultimate users can stream in 1440p at speeds of up to 30 Mbps. Lower levels can only stream in 1080p at speeds of up to 12 Mbps.

Microsoft might reach more people with the free version of Xbox and make more money from ads at a time when subscription prices are going up. It also fits with the company's larger cloud and gaming strategy, which aims to get more people involved and make money in other ways.

Wall Street is still positive. Analysts agree that MSFT stock is a Strong Buy, with an average price target of $627.95, which means it might go up more than 21% from where it is now.