Microsoft expected to team up with Comcast and Verizon on pay TV via Xbox Live

Microsoft is expected to announce that it will offer online pay TV from Comcast and Verizon Communications via the Xbox Live online gaming service. The aim is to channel more entertainment to the company’s video game console, which serves as the gateway to the digital living room. The announcement could come as early as tomorrow.

The story was first reported on Sept. 19 by DigiDay, and then it was outed once again by Bloomberg Businessweek on Sept. 28. Microsoft is in talks with about two dozen providers of music, sports, movies and TV shows in the U.S. and Europe, according to Businessweek. We’ve confirmed that the announcement is imminent. But rumors of the deal have circulated for a while; clearly it’s a pretty complicated announcement with lots of parties involved.

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When Microsoft first conceived the Xbox in 2000, part of the strategy was to make it into a gateway to internet services. Back then, the ambition was to head off the PlayStation 2. Microsoft renewed its efforts in 2005 with the launch of the Xbox 360, which was expected to be more than just a video game console. Now the Xbox 360 will be a way to effortlessly switch between games, DVDs and pay TV. That could make the game console a lot more attractive.

Microsoft has already said it will add Bing search to the Xbox Live service, and it has redesigned Xbox Live to make it look a lot more like the Windows 8 Metro interface, which will be consistent across Windows Phone, Xbox Live, tablets, and Windows 8 PCs. The Xbox accessory Kinect can be used to issue voice commands to the TV interface, making it easy to search and navigate through the interface with voice commands.

Microsoft is expected to sign deals with Time Warner’s HBO cable channel, Sony Pictures Entertainment’s Crackle streaming service, NBC Universal’s Bravo and Syfy channels and Lovefilm UK, a subsidiary of Amazon.com. Microsoft did not respond to a request for comment.

Under the deal with Comcast’s Xfinity TV service and Verizon’s FiOS, users would have to prove they are already pay TV customers in the regions where the services operate in order to get the pay TV service on the Xbox 360. Users can already use Xbox Live to get subscriptions to the Netflix, Hulu and AT&T U-verse services (the latter in regions where it is offered). Comcast has 22.5 million pay TV customers and FiOS has 3.8 million. Those services want to head off defections by giving users more ways to watch them and more digital distribution access points.