Microsoft and Amazon expanded their cloud gaming services on July 23, 2026, targeting broader audiences through cost-reducing ad options and integrated streaming platforms amidst rising hardware costs.
Microsoft Tests Ad-Supported Cloud Streaming
Microsoft's Xbox division began testing a free, ad-supported cloud streaming option for Xbox Insiders.
The limited-time trial allows users to stream select owned games in one-hour sessions preceded by ads, without requiring a paid subscription.
"Our goal is simple. Give more people more affordable ways to play," Xbox wrote in a blog post on Xbox Wire.
The company noted that the feature helps players access newer titles built for Xbox Series X|S on existing Xbox One hardware or mobile devices, particularly in regions where consoles are less affordable.
"Advertising has existed in gaming for decades, from in-game placements to free-to-play models," Xbox said. "But it hasn't always been built with the player in mind.
When done well, advertising can help lower the cost of access."
Microsoft outlined strict guidelines for the initiative, promising that ads will only play before sessions begin and will not interrupt active gameplay.
"For brands, this only works if showing up here adds to the experience, not takes away from it," Microsoft added.
The company emphasized a player-first approach: ads should create value, not interrupt gameplay, meet quality standards, be clearly labeled, and fit platform expectations.
The test comes during significant organizational changes led by Xbox CEO Asha Sharma, including a 20 percent workforce reduction, studio divestments, and upcoming console price increases of up to $150 starting August 1 due to rising component costs.
"Last October, we increased Xbox console price by $20-$70 in the U. S.
," Microsoft said. "We hoped another price increase would not be necessary...
Unfortunately, console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027."
Microsoft emphasized the structural challenges facing hardware manufacturers across the consumer electronics market.
"The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles.
Unlike phones, computers, speakers, and other consumer devices, consoles are typically not sold at a profit, but instead for less than they cost to make," Microsoft stated.
Sharma recently highlighted the financial necessity of shifting the business model away from expensive hardware generation costs.
"Our business today is not healthy," Sharma said. "We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.
We entered Gen 9 with a smaller install base and a higher cost structure."
"To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content.
While those businesses have created meaningful value, they did not grow at the pace we expected.
As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome."
"And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox," Sharma added.
Amazon Integrates Luna into Prime Video
Simultaneously, Amazon integrated its Luna cloud gaming service directly into Prime Video.
The move gives Luna prominent visibility among Prime subscribers paying $14.99 per month, bypassing the need to access the platform through a separate website.
Amazon's gaming division is focusing on casual players using existing devices rather than competing directly with traditional hardware manufacturers.
"I always say people don't have to like our strategy or agree with it, but it is important," Amazon's gaming head, Jeff Gattis, told CNBC.
"Hopefully, they understand it."
Luna currently operates across the United States and 13 other countries, with Amazon aiming to reach 10 million to 20 million users.
