Microsoft May Challenge Cable Companies With Pay TV Service Through Xbox

Microsoft (NSDQ: MSFT) may be trying to create a “cord-cutting” over-the-top TV service by selling access to networks’ programming through its Xbox system, Reuters reports, citing unidentified sources. So far, Microsoft appears to be in the early stages of talks with programmers about its planned service, which would be at least a year away from being introduced to the public.

Microsoft is considering a range of possibilities for becoming a “virtual cable operator.” The basic scenario would call for Microsoft charging Xbox users a monthly subscription as part of an internet streaming service, similar to other over-the-top providers like Boxee. It would also consider participating in the “TV Everywhere” concept by using Xbox to authenticate current cable subscribers and allowing them to watch shows through its interactive system.

In that case, Microsoft would establish “content silos” by selling individual channels such as HBO or Showtime directly to its users. The company has already taken some limited steps in that direction. For example, in June Microsoft said it was adding content from ESPN (NYSE: DIS) 3 on the XBox Live online service (but not ESPN’s main channel).

Word of Microsoft’s interest in offering expanded pay TV subscriptions for Xbox Live first surfaced in April, in connection with meetings between former News Corp (NSDQ: NWS). COO Peter Chernin and Redmond executives.

Microsoft’s exploration of expanding its video services comes as Google (NSDQ: GOOG) and Apple (NSDQ: AAPL) are getting attention for their respective efforts to offer subscription TV programming through internet-based systems. At the moment, both are experiencing some resistance from programmers. While it seems that Microsoft may be a little late in jumping into the pay TV space that its rivals have already entered into, considering the disputes about the actual amount of cord-cutting going on, timing its service a year from now might be the better bet, as consumers and content companies warm up to the idea.

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