Xbox TV studio may yet live under Machinima's roof at Warner Bros.

The executives over at Microsoft recently cut a huge number of jobs. The Xbox Entertainment Studios television production company was a part of that, but the division may continue operating if a rumored deal goes through.

Microsoft wants to sell Xbox Entertainment Studios, which was going to create original video content for Xbox Live. Warner Bros. is looking into potentially picking up the studio, according to a report from The Hollywood Reporter. The two parties aren’t providing details at this time, but the rumor claims that the Xbox video division would merge with Warner’s existing game-video production company, Machinima. Game-related video is a big business, and if Microsoft doesn’t want it, then Warner Bros. is potentially seeing dollar signs.

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Fans widely perceived the shuttering of Xbox Entertainment Studios as a sign that new Xbox division boss Phil Spencer is shedding anything that isn’t fully game related. Many early adopters want Microsoft and Sony to take a hardline “all games, all of the time” approach. While Spencer seems to partly agree with that, the company is still making original video and adding NFL and TV-streaming features to the Xbox One. At the same time, gaming-related video content is popular on the Web. YouTube’s gaming channels rack up millions of hits every day, and the livestreaming video site Twitch claims that it has more than 50 million monthly viewers.

Warner Bros. already has Machinima, a production company responsible for YouTube-style news, instructional, and entertainment video, and an Xbox Entertainment Studios acquisition could help it produce higher-quality shows for a hardcore gaming audience.

The Hollywood Reporter story does claim, however, that talks between Microsoft and Warner are in its earliest stages and that a final deal is far from guaranteed.

We’ve reached out to Microsoft, and we’ll update this post with any new information.

“[Warner Bros.] is constantly having preliminary discussions regarding business opportunities with numerous companies at any given time,” reads a Warner statement on the subject. “A conversation is just that — a conversation.”

While WB may potentially take over Xbox Entertainment Studios, Microsoft is hanging on to some of the talent that formed the division. Former CBS executive Nancy Tellem formed the Xbox video team, and she is staying behind to oversee the original Halo: Nightfall television series that is still coming to Xbox Live. Microsoft is also still planning to release original documentaries — including one about the infamous Atari landfill that was the final resting place for hundreds of old carts like E.T.