Will Your Next Cable Box Be an Xbox?

Microsoft is reportedly in talks to get into the TV subscription business. No, this isn’t the return of WebTV; instead, it appears that Microsoft is looking to turn the Xbox 360 into an Internet-connected set-top box.

According to Reuters Microsoft is considering licensing TV networks for online delivery via the Xbox console. These discussions, which are reportedly still in early stages, would allow Microsoft to offer subscriptions to various channels — a la traditional cable companies — or to offer a la carte programming or station options.
In essence, this would be like cable or premium TV, only delivered over the Internet () via the Xbox, rather than over cable and through a set-top box.
As increasing amounts of television content becomes available online, thanks to official network websites and services like Hulu (), Hulu Plus and Netflix, more consumers are either dropping to lower-tiered cable plans or cutting out cable entirely. In fact, a bevy of devices — from the Roku XDS to the Apple TV to the Boxee Box — offer consumers the ability to watch broadcast content on their television sets, delivered over the Internet.
Even live sports packages — once one of the marquee moneymakers for satellite companies like DirecTV — are now being offered to users online or via a compatible set-top box.
Cable operators are trying to counter some of these services with online initiatives like Comcast’s Xfinity TV. Acknowledging that the television is no longer the sole consumption device, companies like Comcast and Verizon are looking at delivering live or on-demand content to devices like the iPad.
The Microsoft plan seems aimed to take a middle ground approach. Rather than emulating Google’s () (so far shaky) strategy with Google TV, Microsoft would work with networks and media companies to offer content.
This could be a boon for big conglomerates like Disney, who have a long history of sparring with cable operators over carriage fees. A digital, Internet-delivered alternative would offer competition, which could presumably result in better carriage deals. Media companies could also leverage new platforms to increase their online advertising rates.
Of course, for consumers, the potential advantage of choosing to receive content via an Xbox 360 versus a cable box is less clear.
A la carte pricing can mean that consumers don’t pay $150 per month for digital cable, but it also means they don’t get as many channels. It also means, in the case of the Xbox, that they’ll need to spend $200 on their set-top boxes.
That isn’t to say the strategy doesn’t have potential. In the UK, SkyTV has offered its Sky Player via the Xbox since 2008, allowing subscribers and non-subscribers with a broadband connection to access SkyTV content.
It took 15 years, but broadband, the switch to digital broadcasting and advances in streaming technologies have finally shown the Internet is and will continue to be a disruptive force in television delivery.