Microsoft (MSFT 0.46%) and Sony -- along with Nintendo -- have a big advantage when it comes to video games. They supply the consoles that most players are using. But that's not deterring challengers like and Alphabet's Google, which are hoping that their server-side muscle can help people enjoy top-tier video games without powerful consoles.

Microsoft and Sony both have video game streaming services of their own, but they'll see their hardware-based advantages erode if cloud streaming takes off. What can they do to stay a step ahead?

Microsoft seems to be working on an answer. Already a giant of nonconsole streaming thanks to its dominance in the PC market, Microsoft is reportedly working on ways to spread its Xbox platform far beyond its Xbox hardware.

A man plays video games

Image source: Getty Images.

More Xbox games may be coming to Windows

Xbox has a strong user base, albeit one that is not as strong as that of Sony's PlayStation, according to sales figures. And there are even more people with Windows PCs, including those who play games on them. In fact, people play more hours of games on PCs than on either PlayStation 4 or Xbox One consoles, according to 2017 data from Nielsen. So it makes sense that Microsoft is taking steps that would allow it to put Xbox games on PCs.

In an interview last month with PC Gamer, Phil Spencer, executive vice president of gaming at Microsoft, said:

Delivering great gaming experience to PC players is critically important to the future of Xbox and gaming at Microsoft. ... While we are proud of our PC gaming heritage, we've made some mistakes along our journey. We know we have to move forward, informed by our past, with the unique wants, needs and challenges of the PC player at the center of decisions we make.

One of the traditional problems with PC gaming is that PCs, unlike a given type of console, don't all have the same hardware specs, so games don't run the same on all PCs. But cloud gaming -- in which the video games stream from a distant server -- could change that, and Microsoft wants to be ready.

As part of its effort to embrace change, Microsoft is reportedly adding Xbox code to Windows. Among those who noticed the code in the latest Windows 10 build is Brad Sams, who wrote in a late February post on that the code "makes it easier for developers to build one game for both PC and Xbox which is a huge win for Microsoft on both the console and PC gaming fronts."

Xbox users can already use Microsoft's Play Anywhere program to track their progress and achievements across both PC and Xbox versions of certain games, but that's not quite the same thing as running Xbox games on a PC.

And then there's xCloud, a cloud video game streaming platform that Microsoft talked about at this year's Game Developers Conference (GDC). Like Google's just-announced Stadia, xCloud will use cloud servers to run its games -- no console required. But the connection to the Xbox platform is also clear, as Microsoft is using its existing Xbox library as a starting point for xCloud (and, of course, is using that "X" in the brand name).

Going beyond the box

Microsoft's moves show that it is thinking about what Xbox will be after it's no longer just a physical box.

Bringing the PC and the console gaming experience together could be the move that Microsoft needs in order to fend off Amazon and Google and adapt to win in a streaming future. Microsoft also has a game studio dedicated to creating console exclusives, and that studios could easily generate exclusives for a multiplatform streaming service instead.

With an inside track and a foothold in two separate gaming worlds, Microsoft shouldn't have to worry much about the changes.