Microsoft was thinking about launching a paid TV subscription service through Xbox Live, but has drawn back after seeing how expensive it would be to licence content.
Reuters reports that Microsoft was holding talks with media executives for more than a year about the service, but when they saw the rates for licensing popular shows, they realised it would be way too expensive for the service they envisioned.
Microsoft has struck deals with a bunch of content providers, such as ESPN and HBO, to deliver through Xbox Live, but it doesn’t have access to all their content, and restrictions apply — for instance, HBO To Go is available only to Xbox members who already have an HBO subscription through their regular TV provider.
Microsoft also has some deals with TV providers like Comcast and Verizon FiOS to deliver their programming to Xbox Live users — but only if they’re already customers of those TV providers. In other words, the Xbox is being used more like a cable set-top box, not a cable replacement.
Once again, this shows that tech companies cannot just lightly decide to take on the TV space. It’s easy for existing TV providers like Comcast to renew their contracts with content owners — both sides understand and trust each other, and Comcast is counting those expenses. To replace cable, tech companies would have to take on big new expenses for a very uncertain return.