Microsoft: Your Next Pay TV Provider?

Reuters reports a rumor that Microsoft wants to offer a subscription television service, and has at least talked to media companies about the possibility.

Microsoft would act as a "virtual cable operator" and deliver content over the Xbox 360 or other devices for a monthly fee. But right now, it's all early-stage scuttlebutt, as the service isn't likely to arrive for 12 months, if at all, and no specific media companies are mentioned.

Microsoft already dabbles in Web TV on the Xbox 360, and is locked in battle with Sony to create the best array of options. The console has Netflix, ESPN3 and on demand video, and Hulu Plus is coming next year.

This sounds like something different. It seems like Microsoft wants to line up a lot of content providers to offer a bundled service similar to cable, but over its own set-top box via the Internet.

It could be an interesting idea. Microsoft would immediately become a nationwide (or worldwide) pay TV provider, and would have a jump start thanks to all the existing Xbox 360s that could theoretically get the service. And because the Xbox 360 already makes money from games, on-demand video and the Xbox Live service, a pay TV plan could undercut cable, satellite and telcos.

Essentially, the pay TV service would just be one more lure to Microsoft's ecosystem. (Imagine if it also worked with Windows Phone 7 and the Xbox 360′s Kinect motion controller.)

Reuters says early discussions have been productive, because media companies wouldn't have to give up their dual revenue stream of licensing fees and advertising. One executive was even hopeful to make more money on interactive ads, and said "the more competition, the better."

I'm at least curious to see what winter 2011 brings, if anything.

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