In a sign that cloud gaming isn’t immune from rising data center costs, Microsoft announced today that it is introducing time limits for Xbox cloud gaming services.
If you want to play more with the Xbox cloud tech, which can stream a game to low-level computers, then you’ll have to pay more. If you use it less, you’re probably not affected.
Beginning in November, Xbox is changing how cloud gaming is included with Xbox Game Pass. Game Pass plans will include a set number of cloud gaming hours each month:
Game Pass Ultimate: 15 hours
Game Pass Premium: 10 hours
Game Pass Essential: 5 hours
The eligible Game Pass subscribers can stream without these monthly hour limits.
“We recognize that introducing limits is a meaningful change, particularly for players who regularly spend more time gaming through the cloud. We expect this upcoming change to impact 4% of Game Pass subscribers,” Xbox said in a blog post.
That small percentage tells us there aren’t tons of players using the Xbox cloud service, but, based on the volume of complaints as a result of this pricing change, I think we’ll find out how valuable the cloud gaming tech is to those who used it.
A source tells GamesBeat why this is happening
Once subscribers use their included hours, they will be able to purchase additional cloud playtime through the Xbox Store. Available hours, purchasing options, and cloud gaming features may vary by market. Xbox will share pricing and further details before the changes take effect.
“The cost of building cloud capacity is very high and continues to go up due to the RAMpocalypse and Storagepocalypse,” said one source familiar with the matter. “But the additional cost of operating a cloud gaming service with data center capacity but also bandwidth also remain really meaningful.”
The person added, “We believe the popularity of cloud gaming streaming capacity is going to continue to rise in popularity. To manage through that, not just to be able to invest in incremental capacity, but to invest in capacity ahead of demand, which is important here, we need to have a sustainable business model behind that.”
Another point here relates to price. The person said the reality is that cloud game streaming started in the early 2010s and then it saw a resurgence in 2019 through 2021.
“Back then, cloud game streaming was pretty new to most people. They didn’t know what it was, how they would use it, why they would use it, and there were many people around the world who never considered it,” the person said. “Six years later, there are fundamentally different user behaviors for cloud game streaming as it continues to scale. We have some people who use it on their Gen 8 Xbox to play Gen 9 games. We have some people on Gen 8 and Gen 9 who primarily use it to sample games in Game Pass.”
If those latter people like the games, then they install them locally.
“Then we have people on both Gen 8 and Gen 9, who use X Cloud to play when they’re away — when they’re at school, when they’re away for Thanksgiving with in-laws — and then we have this growing cohort of people around the world who either can’t afford a console or can’t afford it at this time, or are not console gamers and therefore use this as the primary way in which they play console grade or PC grade games,” the person said.
All of those players are have different behaviors. And, as a result, unique from cloud game streaming versus traditional local play is the cost to serve. Therefore, varies very enormously between someone, who might just play two hours a month to sample games, someone else, who will play a game on a cloud service for the rare game that doesn’t play on Gen 8, and still someone else, who might only ever cloud game stream.
“And so as the service evolves, as players continue to adopt it, it is just necessary for us to change our business models to reflect what was a homogenous player group into an increasingly diverse player group,” the person said.
The person acknowledged that last year’s cloud gaming prices were wrong, but Xbox was committed to making an ongoing series of changes to make them right.
The company said it was rethinking Game Pass and repackaging it, pulling Call of Duty out and then reducing the price. This is part of an overall effort to ensure that as Xbox service evolves and changes, and the users behind it change, Xbox will make sure that it pricing is right.
“And we’ve made a commitment that that’s going to continue to happen. There are some important differences. Ultimate’s price went up for everyone. In this instance (for the Xbox cloud), this would have historically affected fewer than four in every 100 players,” the source said. “And so this was something that everyone who was an ultimate subscriber either had to pay more or choose a less expensive tier. And at the same time, we were adding value through both COD, Fortnite Crew, and other games.”
The source said that only four in 100 players historically hit that cap.
“We were also making additional changes, whereby, and again, there’s still going to be hours included in here. And consistent with that is that 96 in every 100 players never even hit those caps. In addition, we are separating cloud game streaming access from the Game Pass subscription. So, for players who don’t need Game Pass every month, or for players who used Game Pass to access cloud, they actually now have a new pathway that obligates them to no monthly recurring subscription. But ultimately, we have talked about the need to keep gaming affordable, keep gaming accessible, meet players where they are, and offer more different solutions for an increasingly diverse business and very different players. Part of that is that we have and will continue to change our offering.”
The person added, “One of the things I want to make clear is we’re not doing pay as you go. You’re not being metered. You’re not being billed by the minute, second, hour. You will be purchasing batches of hours, and I would say our commitment to keeping those hours affordable, an approximate reflection of the cost to serve and the margin we need to continue to invest. You’ll see that in the pricing that will be announced a little bit closer too. And then the other thing that I would say is the packages of hours themselves are being constructed in a way that naturally fits the player’s need.”
So this means that players will not be buying an hour at a time.
Those players will find that Xbox designed the packages so that they always need a little bit more. It’s going to reflect the organic needs and behaviors of the players.
“As you can imagine, there’s a bunch of things that have happened over the last five years. I talked earlier about growing divergence in the number of different player types that we have, but within each of those player types, we now have a clear distribution of how do people play, how does that change, what’s the location, what’s the device. All of that is informing how we’re doing this,” he said.
I noted the memory chip crisis could push consoles above $1,000. That means that not buying a machine may be a more and more viable option. Then more people could decide to shift to the cloud.
In response, the person said, “The company’s been very public that we see growing usage of cloud game streaming. That we believe in cloud game streaming. We’re seeing more and more people in the industry, in the publishing community, talk about growth there. And how we think about it as a device is a different question.”
The person added, “We think of it as an increasingly important and demonstrably popular access pathway for players, and we see today’s changes, among others, that we’ve made and will continue to make, as essential to investing in the capacity required to support that. I don’t have a like much more detailed answer for that, but we want to continue to ensure that we can provide the capacity that players need. We need a business model to support that, and today’s changes more clearly map how cloud game streaming is used by players with the business model that supports it, which helps players who do use it as well as players who don’t.”
Even with this change, it’s expected that the number of cloud game streaming customers will increase over time.
“We definitely believe it’s going to be a growth business for us, and it has been for years,” the person said.
Will this trigger players?
“As I mentioned, it’s going to we expect it to affect very few players, and at the same time, it’s expanding the availability and actually lowering the entry price point for all other players. That is based on these two sides of analysis, which is what do we see in player behavior, and then what do we see in terms of forward investment to continue to match what we believe demand will be in 27, 28, 29, and on with what we see today,” the person said.
The person said Xbox is taking a look at what the forward investment case would be, and Xbox is also looking at the X Cloud.
“The most important thing here is, or the way that I would think about it is, you don’t build capacity and say, ‘I hope this is helpful for the next 18 months,'” the person said. “You build it, you expect it to be there for a very long time, and so just like the decision to do a generation of consoles, and just like the decision for a player to purchase a generation of consoles, our decisions to invest in cloud game streaming run over the very long term around the provision of that service to users, and what we’re doing here is making sure that the business case is right there, which is tying both the cost and the consumption a little bit more closely to the player behavior.”
Cloud Gaming Without a Game Pass Subscription
Also beginning in November, players will have a new way to use Xbox cloud gaming without
subscribing to Game Pass. Some players will find this part of the change to be working in their favor.
Players will be able to purchase cloud playtime hours through the Xbox Store and stream eligible games they own on supported devices. This will provide another option for people who want occasional access to cloud gaming or do not want a recurring Game Pass subscription. You might think of this kind of person as using an Xbox or PC gaming device at home, but using a lightweight laptop with a cloud connection while traveling.
Cloud gaming can also give Xbox One owners access to eligible games built for Xbox Series X|S without requiring an immediate hardware upgrade. This feature can be particularly useful in
markets where consoles are less available or affordable. Xbox will continue adding cloud support for more games throughout the year.
Why Xbox Is Making These Changes
The company is introducing this model because the cost of providing cloud gaming grow as more people use it and play for longer. Moving to monthly limits allows Xbox to keep offering the service while continuing to invest in its reliability and performance. The team understands that for some players the practical result is a higher cost.
In November, Xbox will provide more information about pricing, purchasing additional hours, eligible games, market availability, and how players can check their remaining time.
Xbox said it listen closely to player feedback before and after the change takes effect and share any adjustments they make.
It’s worth looking at this in the context of gamer reactions to changes that negatively affect gamers. Xbox got a torrent of anger from gamers in the fall when it raised prices for Xbox Game Pass. Sony also saw its share of criticism when it said that it would end the use of physical disks in its consoles in January 2028. In both cases, players felt like they had something that the console maker took away after they made the decision to purchase.
In this case, there are some avid fans of Xbox cloud gaming, but those players are turning out to be playing so much every month that they run up the bill for cloud services. That means the cloud, which depends on data center processing, will see rising prices related to data center costs. Microsoft is anticipating those data center costs going up, largely because of high demand for AI, which can use the same data centers as cloud gaming.
In this case, the common resource — the data center — is seeing its costs go up in price over time, according to a source familiar with the matter. As a result, the company has to charge more not only for the AI services the data center provides, but also it has to charge more for the cloud gaming services the data center provides, the person said.