Microsoft planning Xbox 360 TV service to compete with Google TV

Amidst the hoopla surrounding Google TV and Apple TV, Microsoft has been oddly quiet. Now we have an idea of what the software giant is up to: It’s apparently in talks with media companies to license TV networks for a subscription web TV service, people familiar with the plans told Reuters.

The service would be accessible through devices like the Xbox 360 — which is increasingly becoming more of an entertainment hub for Microsoft, instead of just a pure gaming machine. The wildly popular Xbox 360 could serve as a Trojan horse for Microsoft’s TV service, while both Apple TV and Google TV rely on consumers adopting new devices.

It’s still unclear what exactly Microsoft is proposing. One possibility is that MS will create a “virtual cable operator” that would deliver TV over the web for a monthly fee. Alternatively, the Xbox 360 could be used to offer increased interactivity for existing cable TV subscribers. Microsoft could also offer individual channels like HBO or Showtime in an a la carte fashion — something the cable industry has long avoided.

Whatever Microsoft ultimately decides, we likely won’t see anything for 12 months, according to the sources. Microsoft’s early discussions with media companies have been productive, the sources say.

The isn’t the first time Microsoft has tried to launch a TV service using the Xbox 360. In 2007, Bill Gates announced that you’d be able to use your Xbox 360 as part of Microsoft’s IPTV platform. Microsoft finally delivered on its promise last month by offering AT&T U-Verse subscribers the ability to use the Xbox 360 as a TV set-top box. The company also offers some ESPN programming on the Xbox 360 already.

If these rumors pan out, Microsoft will also offer a different sort of service than either Apple or Google. Apple is trying to get permission from media companies to rent TV episodes for 99 cents on the Apple TV, meanwhile Google is trying to coax TV networks into letting their websites play nicely with Google TV. It looks like Microsoft is just trying to rebroadcast existing content, which may be an easier sell for media companies.