Two anonymous people familiar with the company's plans told Reuters that Microsoft is in early talks with content providers to become a "virtual cable operator." The service would reportedly come with a monthly fee, and would allow owners of the Xbox 360 game console to stream TV.
Microsoft is also reportedly pursuing a lesser option, which would allow existing cable subscribers to watch and interact with content via the Xbox, similar to how providers offer streaming services over the Web. The Redmond, Wash., software giant could also allow individual channel subscriptions, for networks such as HBO or Showtime.
Microsoft is looking to counter new products that launched this fall from Apple and Google in the set top box market. However, Microsoft's plans are said to be at least 12 months away, people familiar with the talks reportedly said.
In September, Apple introduced its new cloud-centric Apple TV, which sells for just $99. The device has limited internal storage and allows streaming of high-definition TV shows from Fox and ABC for 99 cents.
Apple had more ambitious plans for its new product, and pitched to TV networks a $30-per-month unlimited subscription plan. But networks allegedly rejected that idea, leading Apple to push for 99 cent TV rentals. And even that plan was rejected by major networks like CBS and NBC.
Google has faced its own share of problems with newly launched Google TV products running the Android operating system. While devices with Google TV initially had access to streaming Web content from network stations, many of those networks made efforts to block Google TV devices.