Just last month, Microsoft rolled out the revamped Xbox Dashboard with the blocky Metro design while shoving previous add-on features like Netflix and Twitter into the Apps category. This was the second major OS overhaul since the console hit the market back in 2006, and promised to make the gadget a bit more entertainment-friendly with the introduction of TV programming and integrated Kindle support.
But Microsoft also reportedly had plans to introduce a separate set-top box called Microsoft TV that, like the Xbox 360, would bypass local cable companies and satellite TV providers altogether by channeling in Microsoft's own TV subscription service. This would take a more Hulu-like approach by offering current TV shows and actual live networks.
So with both units poised and ready to take on the world, the Redmond company began to solicit offers from cable providers and networks about the cost of streaming live. The "intense talks" stretched on for over a year, and Microsoft had hoped to wrap things up in time to stream content to consumers over the next few months.
But Microsoft quickly discovered the harsh, cruel reality that is Hollywood, and pulled out of negotiations after content providers demanded licensing fees that were far more than Microsoft wanted to spend. Insiders close to the matter stated that the fees were just too insanely high for the business model Microsoft apparently envisioned.
"They built Microsoft TV, they demoed it for us, they asked for rate cards but then said 'ooh ah, that's expensive,'" said one unnamed senior media executive.
As it stands now, Microsoft's TV service -- what there is of it thus far -- is to compliment the user's current cable and satellite subscription, not replace it. For example, just days ago during CES 2012, Microsoft's keynote presentation revealed that News Corp had signed on to provide content from its numerous channels including FOX, FOX News, The Wall Street Journal and more via an app.
Still, content providers are hopeful that Microsoft will return to re-negotiate. After all, there's plenty of room for one more TV service provider to rival Time Warner and Comcast. "It doesn't mean they won't be back in another iteration. We'll have to wait and see," said the senior media executive.
ZDnet points out that this very conflict between Microsoft and content providers may be why Apple is seemingly stalling the iTV. Like Microsoft before it, Apple is reportedly trying to hammer out the negotiations and will no doubt face the same steep licensing fees that sent Microsoft running.