What you need to know
Microsoft announced its plan to purchase Activision Blizzard King, kicking off an ongoing legal battle with the FTC that has resulted in internal emails becoming public.
An email chain between Microsoft and Xbox leadership from July 2021 discussed competitive strategies in response to rumors that Google would turn Stadia into a generic Google Cloud service for developers.
An email response from Kareem Choudhry, head of cloud gaming at Microsoft, confirms that teams were working across departments to create an xCloud PC streaming stack with an Azure SKU.
Microsoft's "Project xCloud" was formally revealed in 2018, and was later integrated into Xbox Game Pass as Xbox Cloud Gaming (Beta) in 2020. Since its launch, the cloud streaming service has been limited to games that were available on the Xbox Game Pass service and were specifically noted to be available on the cloud. Internal emails from Microsoft leadership dated July 2021, however, show that the team had plans to bring cloud gaming to PC.
The partially redacted emails were included as evidence during the Xbox vs. FTC hearing regarding Microsoft's purchase of Activision Blizzard King. The regulating body has attempted to use Microsoft's participation in the cloud gaming market as justification for its denial of the acquisition. Several emails from that hearing were released publicly erroneously or poorly redacted, giving the public a much larger glimpse into Microsoft's internal communications than we're used to seeing.
In an email reported on by The Verge, Microsoft CEO Satya Nadella contacted other Microsoft leaders, including Xbox head Phil Spencer, cloud gaming head Kareem Choudhry, and head of Xbox experience Sarah Bond. Nadella links to an article speculating on Google potentially converting its now defunct cloud streaming service, Stadia, into a white-label cloud gaming solution for developers.
Nadella speculates in the email that it "seems like they [Google] will have a leg up because their stuff is more generic Linux VMs + Network" before asking if Microsoft intends to do the same for Game Pass PC.
Phil Spencer responded to Nadella's inquiry first and elaborated that Google's potential move would be less generic for developers and creators. Spencer also stated that developers were choosing to port to Linux/Stadia as opposed to developing for the platform first because of Linux's low user share. Spencer's email response did validate Nadella's concerns about Google being able to reuse their Linux cloud software to recoup costs, but then also confirms that Microsoft would be able to do the same "as we stream PC native games from an Azure GPU SKU."
Kareem Choudhry then verifies Spencer's statements, adding that teams under both Sarah Bond and Jason Zander were working toward a suitable Azure SKU. This SKU would be part of a series that would pull double duty to provide customer based cloud streaming services as well as support for Xbox Cloud Gaming via PC.
Microsoft's efforts to push cloud gaming have slowed as of late, due in part to regulatory bodies in the EU, UK, and US using the nascent market to intervene in the Activision Blizzard King acquisition. Microsoft has penned deals with several other cloud streaming services to bring Xbox titles to those platforms. This includes NVIDIA's GeForce Now service, which Spencer declared Xbox's "#1 competitor" in the cloud gaming space in the 2021 email chain.
Spencer also stated that Xbox would be keeping an eye on both Google and Amazon Luna, but declared those operations were struggling. "Google is a massive and aggressive competitor but honestly I've been surprised by their lack of progress with Stadia." Spencer said in his email.
Despite internal communication regarding an Azure SKU in 2021, there still hasn't been any public movement on Xbox Cloud Gaming allowing streaming of PC games at this time. Microsoft may be keeping cloud gaming progress close to its chest due to regulatory scrutiny, as the CMA has really narrowed down its complaints to Microsoft's prominence in the nascent market.
Windows Central's take
Even if Microsoft has managed to get its Azure GPU SKU off the ground in the two years since these emails were originally drafted, it's unlikely we'll hear much about changes to cloud gaming until after the Activision Blizzard King acquisition comes to a close. With regulators putting more and more emphasis on Microsoft's investments into cloud infrastructure as a point of contention, any announcements about the service could be used by the CMA or the FTC to continue efforts to tank the ABK deal.
Activision and Microsoft have extended the deadline on the merger to close by October, pending a new review by the CMA. In the meantime, players who want to stream their games via the cloud are going to be limited to Xbox titles, as Xbox Cloud Gaming in 2023 still relies on Xbox Series X hardware in Microsoft's datacenters, or NVIDIA GeForce Now which now offers Xbox games in addition to PC titles via its streaming service.