Microsoft’s new Xbox is actually the next step in an ambitious master plan to shake up the video game industry, and end the rivalry with PlayStation forever (MSFT, SNE)

4. With the combination of Game Pass and Project xCloud, Microsoft could win the race to create the first major “Netflix of gaming” service.

Xbox Game Pass

Microsoft

For a monthly fee, Netflix offers subscribers an instant library of content. Some of that content is produced by Netflix, and some isn’t. You don’t need to download any of the content — it just streams to your device.

Thus far, no company has had success with a comparable service for gaming. There are a few services that offer streamed video games, like Google Stadia and PlayStation Now, but neither has taken off.

Microsoft, however, has had wild success with Game Pass — an instant library-type service where each game must be downloaded to your console before playing. The service has over 10 million paying users as of last April, according to Microsoft.

Paired with Project xCloud, Microsoft may be the first to actually succeed with a subscription-based video game streaming service with an instant library, à la Netflix, that pairs Game Pass’ vast library and existing subscriber base with an option to stream games as well.

“I want it to be about choice, but I do think the strength that we’ve already seen in the last two years with Game Pass is an important component of this,” Spencer said when asked about the business model for xCloud.

“There’s paying for access, and then there’s paying for a library of games,” he said. “And the Game Pass component is really critical, because you want to have access to hundreds of games that you can go play. That is more your Netflix-type example.”

This September, Spencer is delivering on that by combining Game Pass with xCloud: For $15/month, the 100-plus games in the Game Pass library become streamable on smartphones and tablets, in addition to being downloadable on Xbox consoles and PC. Moreover, you can start a game on one platform and pick up where you left off on another.

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