The software giant has proposed a range of possibilities in these early talks including creating a "virtual cable operator" delivered over the Internet for which users pay a monthly fee. This would allow consumers to "cut the cord" on their existing cable company or use Microsoft's console to authenticate existing cable subscribers to watch shows with "enhanced interactivity."
The Xbox 360 can already be used in some markets as a secondary cable box, through AT&T's U-verse in the US and via Telus in Canada. Currently, on-demand TV and movies are limited on the Xbox 360 to Netflix and Microsoft's own Zune service, though Hulu content is coming. Pricing for this new Microsoft TV service has yet to be determined, but one thing is certain: it needs to rival Apple's and Google's offerings.