Microsoft is set to launch a new subscription-based online TV service via the Xbox 360 and other devices.
Reuters claims that sources close to the project have revealed that Microsoft is currently in talks with media firms negotiating TV network licensing deals.
The service is unlikely to arrive until late 2011 at the earliest.
A virtual cable operator
Microsoft hopes that a subscription-based TV service on the Xbox 360 would be able to compete with the likes of Google TV, Apple TV and streaming services such as the popular Netflix in the US.
Microsoft is looking to establish a "virtual cable operator" on the Xbox 360, charging users a monthly fee to access networks such as ABC, NBC, Fox, CBS, ESPN or CNN.
The computing giant is also looking at other viable options, such as offering cable subscribers the ability to use the Xbox to watch shows with deeper interactive functions, such as instant messaging and social networking.
Microsoft may also consider setting up bespoke programming packages for its customers, such as sports or family programming packages.
Microsoft may also look to sell individual channels directly to subcribers.
The Xbox 360 manufacturer has so far declined to comment on the reports.
Speaking at the Reuters Global Media Summit this week, News COO Chase Carey said the arrival of alternative TV services – such as the rumoured service in development at Microsoft – give cable and broadcast networks further ways of reaching niche audiences.
"The emergence of platforms like that -- from people like Microsoft which is really more a theory at this point, or Netflix -- increases the value of content and brands and those who create the content and channels that actually the business and drives consumer demand," said the News Corp boss.
Microsoft is also said to be developing Kinect-based gesture tech which will allow users to select and change channels and give them better control over their TV viewing experience.