Amazon and Microsoft cloud gaming plans target different audiences

Amazon and Microsoft cloud gaming plans are moving in different directions as both companies look for a broader audience beyond the console-first gaming market. Microsoft’s Xbox division said Thursday it will test an ad-supported way for people to stream games they already own, while Amazon said it will add its Luna cloud gaming service to Prime Video.

For investors, the moves show two tech giants trying to make gaming subscriptions and streaming more useful after years of uneven adoption. Both companies are strong in cloud computing, but gaming over the internet still faces a practical barrier: a shaky connection can create lag between a player’s action and what appears on screen.

What is cloud gaming and why is latency a problem?

Cloud gaming lets people play a game running on remote servers instead of on a console or high-end PC, with the video streamed to a phone, computer or TV. Latency means delay, and even a small delay can make fast games feel unresponsive, which is one reason the format has not become mainstream.

Microsoft said in an Xbox blog post that its aim is to give more people lower-cost ways to play. The company said members of the Xbox Insider Program can join the test, which will allow one-hour streaming sessions for games already in a user’s library.

Xbox also said advertising in games has existed for decades, including product placements and free-to-play models, but added that it has not always been designed around the player. The company said advertising can lower the cost of access when handled well.

The ad test comes as Xbox works through a broader reset. Microsoft bought Activision Blizzard, the publisher of Call of Duty, for $75.4 billion in 2023. Since Asha Sharma became Xbox CEO in February after Phil Spencer, she has made leadership changes, discussed a future console, pushed for exclusive games and cut subscription prices, according to CNBC. This month, Sharma announced a 20% workforce reduction and said Xbox will spin out four development studios.

Amazon is taking a different route by putting Luna where Prime members already spend time. Amazon said Luna will be added to Prime Video, which is included with Prime subscriptions that cost $14.99 a month. Luna previously sat on its own dedicated website, so the Prime Video placement should give it more visibility inside Amazon’s entertainment bundle.

Amazon launched Luna in 2020, during a period when gaming demand was boosted by more time spent at home. Microsoft introduced Game Pass in 2017, while Google later launched Stadia and shut it down in 2023.

Luna allows users to play on smartphones and standard computers without buying a console or gaming PC. Amazon’s gaming head, Jeff Gattis, told CNBC that the company is not trying to win over hardcore gamers or compete directly with console makers. He said Amazon is focused on casual players, including people interested in party games and well-known franchises such as Harry Potter and Tomb Raider.

Gattis told CNBC that Luna has “millions” of users across the U.S. and 13 other countries. He said Amazon’s goal is to reach 10 million to 20 million users “as quickly as we can.”

Amazon has also had setbacks in gaming. CNBC reported that the unit was recently reorganized to combine Luna and Amazon’s game studios, and that it has dealt with executive turnover, layoffs and difficulty producing major hits. The company has shut down or offloaded titles including the online game New World and a planned Lord of the Rings project.

Gattis said Amazon is trying to close an awareness gap among consumers who may not know about Luna or understand the company’s approach. In his words to CNBC: “I always say people don’t have to like our strategy or agree with it, but it is important. Hopefully, they understand it.”

This story draws on original reporting from CNBC.