Rumors percolated over the past year that Microsoft was set to release a streaming stick for its Xbox Cloud Gaming service, but then it didn’t. The canceled piece of hardware made an unexpected cameo in a photo posted by Xbox boss Phil Spencer, although it won’t be hitting store shelves. And even if it had, you probably wouldn’t have bought it. According to Spencer, the “Keystone” streaming device was canned because it was shaping up to be too expensive.
Before Google dropped out of the cloud gaming race, it leveraged the Chromecast’s popularity to get Stadia games on the big screen. On Microsoft’s side, the Xbox is the only way to do that, and if you have an Xbox already hooked up, why not play a higher-quality local game? To bridge the gap, Microsoft began work on the Keystone dongle.
Despite the device’s diminutive size, it was shaping up to be an expensive piece of hardware. On The Verge’s Decoder podcast, Spencer explained that Microsoft would have needed to charge between $99 and $129 for Keystone, and bundling a controller would have put the cost close to $200.
Even in a vacuum, $200 for a game streaming bundle is a lot. Google offered a Stadia streaming kit with a controller and Chromecast Ultra for $130, but Google didn’t have a game console to worry about cannibalizing. Microsoft’s Xbox Series S is just $299, and it sometimes drops even lower on sale. As long as Microsoft has a full console priced that low, it doesn’t make sense to offer a streaming stick that’s priced over $100.
Microsoft has increasingly leaned on its Xbox Game Pass service to pull in revenue from its legions of gamers. Cloud gaming is included with the high-end Ultimate subscription, but it’s still labeled as a “beta” service by Microsoft. Most Game Pass content comes in the form of downloadable content for PC and Xbox. Microsoft has been expanding its lineup of game publishers with the acquisition of Bethesda and the pending deal to absorb Activision Blizzard. Spencer has said that Microsoft’s first-party content will launch on Game Pass as soon as it’s released, but cloud gaming is still only available on a fraction of Game Pass titles.