From CNET: In a welcome move, Microsoft announced just prior to Summer Game Fest that later this year it will expand the Xbox Cloud Gaming perk of its Xbox Game Pass Ultimate -- heading toward its first anniversary in beta -- to encompass games you already own. But it's also just a small step that probably won't make a huge impact for a lot of folks initially because of its relatively limited scope.
Microsoft says that if you own a game "that is cloud-enabled in the catalog," Game Pass Ultimate subscribers will be able to stream it. Currently, cloud-enabled games are a subset (albeit a sizable, 75% subset) of the full catalog.
So really, it means that in the beginning, the feature will only be useful for games that have left the service and that you've bought from the Microsoft Store -- because the service doesn't support other game stores, like Steam, and only carries over progress and achievements for its own Store-bought games. Game churn on XGPU is pretty low, so either Microsoft expects it to increase or that the capability is purposefully limited.
It's similar to Nvidia's announcement last week that some GeForce Now games (starting with God of War) you've begun while they were supported by the service will remain available when the licensing term ends. (A nice step to mitigate the feeling that you're losing something when a game disappears.)
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