The news: Xbox plans to add a free ad-supported tier to its Xbox gaming subscriptions, per The Verge. Employees currently have access to testing ahead of a public beta.

Test features include:

• Two minutes of pre-roll ads before gamers gain access to Xbox Cloud Gaming.
• Free-play days so gamers can test games over a weekend and access to Xbox Retro Classic games.
• A one-hour time limit per session, with up to five free hours of use per month.

Zooming out: Xbox Cloud Gaming came out of beta testing last week. At the same time, Microsoft increased the cost of Game Pass Ultimate, which can access Xbox Cloud Gaming, to $29.99 per month from $19.99.

In comparison, PlayStation Premium is $17.99 per month, and Nintendo Switch Online + Expansion Pack family membership, its most expensive tier, comes out to about $6.67 per month.

FAST transition: Xbox is leading the way in gaming platforms by following the example of free ad-supported streaming TV (FAST). When ad-free subscription prices increase, churn is inevitable. To keep money in the coffers, alternative revenue streams need to arise.

PlayStation briefly featured unskippable home screen ads a year ago but removed them in quick order after complaints, calling it a “bug.” However, the ads went out to all PS5 users, with no warning and no subscriptions.

What this means for brands: 46% of gamers often make purchases based on in-game ads, so Xbox is throwing the doors open for advertisers who were previously limited to home-screen ads. The ads aren’t skippable, giving brands a captive audience.

Marketers should focus on influencer-led campaigns that play up gaming and personalization. If ads feel more like a buddy joining them in the living room rather than an interruption, gamers are less likely to be irritated.