Microsoft’s new gaming cloud division readies for a future beyond Xbox

Photo by James Bareham / The Verge

Microsoft shipped its first video game in 1981, appropriately named Microsoft Adventure. It was an MS-DOS game that booted directly from a floppy disk, and set the stage for Microsoft’s adventures in gaming. A lot has changed over the past 37 years, and when you think of Microsoft’s efforts in gaming these days you’ll immediately think of Xbox. It’s fair to say a lot is about to change over the next few decades too, and Microsoft is getting ready. Today, the software giant is unveiling a new gaming cloud division that’s ready for a future where consoles and gaming itself are very different to today.

Microsoft has been building up to this move for a while. The company has been mysteriously acquiring gaming-related companies over the past few years. From Havok in 2015, Simplygon in 2017, to PlayFab earlier this year, you’ve probably never heard of any of them, but they’re important for Microsoft’s bold cloud gaming ambitions. While these acquisitions have been taking place, Microsoft has been reshuffling its gaming teams as the company prepares to launch its own cloud gaming services. Phil Spencer is now Microsoft’s head of gaming, and reports directly to CEO Satya Nadella. Microsoft’s new gaming cloud division is headed up by Kareem Choudhry, a 20-year Microsoft veteran that has worked on Outlook, DirectX, and Xbox engineering.

“Phil really wanted a dedicated team focused exclusively on the gaming cloud,“ says Choudhry, in an interview with The Verge. “Those were conversations that started happening last summer, and we really started creating the structure of the organization at the end of last year.” The new division is designed to entice developers and game publishers to use Microsoft’s cloud services. Ubisoft has been using Microsoft’s Azure cloud services across PC, Xbox, and PS4 with Rainbow Six: Siege recently, and even the mobile game Black Desert uses Azure virtual machines and databases. Microsoft wants more and more game developers to use its cloud, especially as games become more connected across devices for their multiplayer experiences.

Fortnite on an iPhone

“We believe there is going to be 2 billion gamers in the world, and our goal is to reach every one of them,” explains Choudhry. Part of the way Microsoft will get there with its new gaming cloud focus is with subscription services. Xbox Game Pass has been available over the past year, and recently Microsoft decided all of its first-party games would come to the subscription service at launch. Sea of Thieves is the first big title, but future Halo and Gears of War games will also be available. “We’re really pleased with the success that’s happening [with Game Pass],” says Choudhry. “We continue to believe in user choice, and we also believe there’s room in the industry for a gaming subscription and that’s what we’re going to build.”

A “Netflix for video games” would be an important service for any company with cloud gaming aspirations, but it’s going to be a difficult task for Microsoft on rival platforms like the PlayStation 4 or Nintendo’s Switch. Despite the challenge, Choudhry hints that Microsoft could achieve this by streaming games to devices. “We’re looking at ways to make that content available to anyone no matter what device they’re on,” says Choudhry.

Sony’s PlayStation Now service

It feels like every couple of years a new service springs to life, promising game streaming from powerful servers. Sony acquired streaming games service OnLive only to shut it down, and previously acquired Gaikai which eventually became part of its PlayStation Now game streaming service. Sony discontinued game streaming to the PlayStation 3, PS Vista, PlayStation TV, and smart TVs and Blu-ray players last year, deciding to focus on PS4 and Windows PCs instead. Game streaming is a challenging service to get right, and even Nvidia is trying its hand for PC games.

Microsoft has teased Xbox game streaming within three years, and it’s clearly going to be big part of the new cloud gaming division. “We’re spending a lot of time thinking about that space,” explains Choudhry. He says a “bunch of things” need to come together, including making a business model that’s attractive to third parties. “What we’re doing with game pass and creating a subscription-based product, where over half the content is third-party content. I would say we’re getting started from a subscription product perspective.”

Microsoft’s new cloud gaming division is only just getting started on a number of these efforts, and the real test will be whether developers and game publishers are interested in using the company’s tools, distribution methods, and ultimately a game streaming service. Reaching 2 billion gamers is an ambitious target even for a new Microsoft that’s focusing aggressively on the cloud.


I think part of the problem with this will always been lag/latency for the most popular genre of gamers. Playing a FPS with input lag and screen lag is going to make people who have local copies have a giant advantage to those playing in the cloud. For other games this could be a good way to play.

I think latency will almost disappear in the future. I used to have 270 of ping when I was playing CS as a kid (56kbps) and I now have 20 when I play Rocket League (optical fiber).

Latency can be mitigated but it can’t disappear, you are still limited by the speed of light, after all. All you can really do is run your signal though better quality materials (fiber vs copper), and physically place the servers closer to clusters of customers.

If it’s an online game which the vast majority are I don’t see it mattering when the latency gets low enough which is coming with 5G and both ends are having the same latency since theyre connected to that same game. No advantages

May lag potentially be a smaller concern for story mode games as they can pre-load elements as you would a video?

I mean, I don’t see the point personally, since you’re sending a video stream to the client device anyway.

I thought this, too, until I tried out Nvidia’s Geforce NOW beta.

When I play Rainbow 6: Siege on my PC, I usually have around 40ms ping with a ~60 fps on my Surface Book 2, which is just fine for casual gaming.

When I play the same game on Geforce NOW, my in-game ping is stuck at 2ms, but my PC’s latency to Nvidia’s service is about 20-30ms (max). Meanwhile, the service allows me to max out the graphics and still get 100+fps. Putting that together, I’m looking at a break-even on ping with a huge boost to framerate. Also, since the lag I perceive is device-side (as in, things on screen are actually happening 20-30ms before I see them), I think I still have a slight advantage over users who are playing directly from their machines with 30+ ping, because the game gives some leeway to in-game lag. So if I shoot where someone was 20ms ago, it usually still perceives it as me hitting them, while they might not have seen me yet because their system is still dealing with addressing their own ping.

It might be a bit of a placebo effect, but I really think I have a better experience via Geforce NOW compared to playing the game directly.

Geforce Now’s model is the future of gaming. I said it about OnLive too but they were just too ahead of their time. There’s just too much money to be made by being the first company that truly allow you to play any game on any device with a decent internet connection. Apple will hate this because they make money on their hardware and have an incentive to keep you buying new devices every couple years but for everyone who’s not Apple this could be a cash cow.

Wow I personally found Geforce Now to be so useless I have no idea why you’d want to play like that. Would you pay 10 dollars per month for that? Not me.

I am in Canada though, think the servers were in Seattle.

Local player will be getting 20ms delayed 100kB payload their local machine needs to decode and put on the screen.
Streaming player will be getting ~30ms delayed low resolution video stream.

Not that much of a difference.

ok this has been mostly already been proven with nVdia’s recent GRID presentation. They were streaming doom 3 via the internet to an i3 dell and was flawless at 1080p…the only need 50mbps minimum.

I do not support PS Now and I won’t support Xbox Cloud. I almost supported Onlive but thank the heavens I did not.

Same. On top of that I don’t know why I should trust a company that hasn’t cracked the code on what gamers want today to tell me what the future of gaming will be. A company that creates the most powerful console in the world but can’t move more than half of the units of their lower powered competitors. A company that had a 25% defect rate on their last console & allowed their 3 year lead against their competitor to diminish into nothing by the end of the consoles lifecycle. A company that can’t create or acquire many compelling exclusive gameplay experiences… I don’t know man… I just can’t trust their vision for the future. They’ve never gotten it right yet, why would they now?

You never fail to bring this console warring to these discussions, complete with a healthy dose of misinformation. Why?

What misinformation? I’m also not warring. I’m stating how I feel as an owner of the console and as a person who watches how Microsoft moves as a whole.

This part

A company that creates the most powerful console in the world but can’t move more than half of the units of their lower powered competitors

When you know very well that for 95% of this gen, their competitor had a higher powered console.


allowed their 3 year lead against their competitor to diminish into nothing by the end of the consoles lifecycle.

What 3 year lead?

When you know very well that for 95% of this gen, their competitor had a higher powered console.

Power bears little weight on why people chose PS4 over XB1 but power is Microsoft’s new selling point when it comes to XBOX. Since power is so important to them now I’d expect the most powerful console in the world to sell better. Yet beyond its launch people stopped caring.

What 3 year lead?

The three year lead 360 had over PS3 before PS3 dropped their price & started releasing more exclusive games. From then on Sony outsold Microsoft month after month on a fairly consistent basis until the end of both consoles lifecycles where Sony had pretty much matched 360’s lifetime sales after being outsold practically 2 to 1 for the first three years.

Power bears little weight on why people chose PS4 over XB1 but power is Microsoft’s new selling point when it comes to XBOX. Since power is so important to them now I’d

Funny because Sony and it’s fanboys touted power for years until the XB1X came out. Now it doesn’t matter? Hahaha

I hope more news this E3

Got burned on OnLive. I’m not sure I’m wanting to give streaming another chance.

That money I threw into OnLive just disappeared. I was left with a useless streaming box, and a wireless controller that doesn’t work with anything else.

Things have improved greatly since then. Onlive was a small player that didn’t have the funds or server capacity. Microsoft, Nvidia, and Sony all have the cash and resources to make game streaming better.

Correct me if I’m wrong, but I don’t think Sony has anything-cloud to talk about (compared to Microsoft).

PS Now is their cloud service for streaming games, which has been available for a little while now, so they are already in the cloud streaming game. Don’t know if they host their own systems though.

That’s the point, scale. Azure is massive. The winner of the tech is going to be who can reach as many as possible and Microsoft is uniquely capable of doing it. Google may get into it as well but even they don’t have the scale Microsoft has created with billions of investments over the last few years. Now the question will be their execution, because just because they can doesn’t mean they will. They’ve proven many times the capability of fucking up. Hopefully this won’t be one of those times.

Amazon could make a play for it

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