Microsoft's partnership with ESPN to bring streaming sports to the Xbox 360 may be the tip of a streaming video iceberg. According to sources speaking to Reuters, the company is working on deals to launch a subscription service to stream video content to Windows PCs or devices such as the Xbox 360.
Microsoft has proposed a few different ways that its service could work in its pitch to content providers. One would have Microsoft acting as a "virtual cable operator," streaming video in exchange for a monthly fee. Another would use the Xbox to enable existing cable subscribers to stream content with "enhanced interactivity." A third option would allow viewers to subscribe to channels separately—the "à la carte" option that most cable companies have fought against despite consumer demand and pressure from the FCC.
Microsoft's push comes rather late in the game, as rivals such as Apple, Netflix, and Hulu have been working on similar services for the last few years. While both Hulu and Netflix have recently launched streaming-only subscription services, content providers have so far balked at Apple's similar subscription proposal. And most providers have blocked the recently launched Google TV based devices from accessing streaming content from their respective websites.
The conventional wisdom is that online streaming services would jeopardize the "dual" revenue streams that come from cable subscription fees and advertising. Reuters noted that this dual revenue stream has made pay TV resilient against the economic downturn in recent years. But with consumer budgets tight, many are looking to "cut the cord" and pay only for the content they actually want instead of paying $60 or more per month for hundreds of channels they never watch.
Some media executives apparently see added value in Microsoft's proposal. "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," one executive told Reuters. "We could probably charge more for interactive advertising."
It's difficult to say if the dual revenue stream will be able to survive the transition to streaming online video, however. Many consumers looking to replace cable with streaming video options do so because they want to avoid having to "pay" for content twice—once with an expensive cable bill, and once by having to watch tons of commercials. It may be at least a year before any new service can be put to the test with viewers, however. According to Reuters' sources, discussions between Microsoft and media companies are in early stages and won't likely come to fruition for 12 months or more.
Source: arstechnica
