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Microsoft in talks for new TV service -sources

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NEW YORK, Nov 29 (Reuters) - Microsoft Corp has held talks with media companies to license TV networks for a new online pay-television subscription service through devices
such as its Xbox video game console, two people familiar with the plans told Reuters.

The software giant's possible push into the television business comes as Google Inc, Apple Inc and
Netflix have jostled for a seat at the table of television's
future -- a main topic of discussion at the Reuters Global
Media Summit to be held this week.

The maker of the Windows operating system has proposed a
range of possibilities in these early talks including creating
a "virtual cable operator" delivered over the Internet for
which users pay a monthly fee.

Other options include using the Xbox to authenticate
existing cable subscribers to watch shows with enhanced
interactivity similar to how pay TV operators have sought to do
over the Web, said these people.

Microsoft is also exploring the possibility of creating
content silos and selling more individual channels directly
such as an HBO or Showtime. It already has Walt Disney Co's ESPN on the XBox Live online service for example.

These people said a service may not arrive for another 12
months, but early discussions have been productive.

Microsoft said it does not comment on rumor or speculation.
The people involved in the talks asked not to identified as the
discussions were confidential.

News of Microsoft's plans come as the pay-television
industry has sought to allay investor concerns that consumers
are fleeing expensive subscription packages for cheaper online
services operated by companies such as Netflix Inc and
Hulu, which both charge $7.99 per month for streamed shows and
movies. The phenomenon is called "cord-cutting."

The worry is that so-called over-the-top services could
undermine the lucrative cable TV industry, whose dual-revenue
stream model -- cable networks such as ESPN are paid carriage
fees by pay TV operators and also earn revenue from advertisers
-- has made pay-TV one of the most resilient sectors during the
economic recession.

But programmers would welcome new types of competition to
the cable and satellite companies, senior media executives
said.

"We think the more competition the better, we will price
and package it in such a way that we still make the dual
revenue stream," said one of the people who spoke to Reuters.
"We could probably charge more for interactive advertising."

Microsoft has long held ambitions to be a major player in
the TV business and has previously invested in interactive
television initiatives including Web TV and MSN TV set-top box
software.

Its latest plans include offering interactivity to engage
viewers through social media, interactive advertising and
motion control technology, say people who have seen early
demonstrations.

Microsoft has bet on new "gesture" technology that lets
users of its Xbox, who buy a camera accessory called the
Kinect, control on-screen functions using voice to launch
channels and waving arms to fast-forward or rewind videos on
ESPN.

The Redmond, Washington, company is said to be mulling
feedback it has received from programmers including the expense
of such a plan but it is not likely to roll out a service in
the next 12 months, said one person.

The market to determine the future of television
distribution and technology has accelerated over the past
year.

Google has already launched Google TV, an enhanced Web-TV
service with partners including Sony Corp televisions
and Logitech set-top boxes. While Google has also announced
Time Warner Inc's Turner Networks as a programming
partner, it is not yet planning to offer a full suite of cable
networks in the near future.

Apple has also held talks with programmers, but faced
resistance industry-wide over its plans to offer a lower-cost
subscription TV plan, people familiar with the talks have said.
Apple has begun to offer 99-cent TV show rentals for a limited
number shows through News Corp's Fox and Disney.

(Reporting by Yinka Adegoke, editing by Matthew Lewis)

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