In New York, USA, Microsoft Corporation is about to back into TV game, but this time MS may aim at cable, satellite and phone companies.

Microsoft has held talks with TV networks to create a new subscription based TV services on its Xbox gaming console that rival efforts by Google Inc, Apple and Netflix Inc.

Microsoft Corporation’s latest explorations after investments in MSNBC and WebTV come as efforts to redefine living room entertainment have accelerated in the past year with technology companies seeking to offer lower cost alternatives to pricey pay TV subscriptions

There is one scenario under consideration by MS is to create a new TV service on its Xbox gaming console that would establish a virtual cable operator, the service will charge a monthly fee for access through the Xbox to networks like ABC, Fox, NBC, CBS, ESPN or CNN according to two sources familiar with plans.

There are other options which include allowing the cable subscribers to use the Xbox to watch shows with more interactive functions, you could use its features for instance messages with friends over the console while you are viewing your favorite shows.

The company also exploring the possibility of creating programming packages for users to setting up a bundle of sports or children shows, in addition, it could sell more individual channels like HBO or Showtime directly to subscribers, it has already Walt Disney channel and ESPN on the Xbox live online service.

They are saying that a service may not arrive for 12 months but early discussions have been productive. Microsoft declined to comment, the people involved in the talks asked not to be identified as the discussions were confidential.

Microsoft’s plans come as the pay television industry are moving to allay investor concerns that users are fleeing expensive subscription packages for cheaper online services operated by companies like Netflix inc and Hulu and both will charge around $8 per month for the streamed shows and movies, the phenomenon is called cord cutting.

The problem is that so called over the top services could undermine the lucrative cable TV industry whose dual revenue stream model has made pay TV one of the most resilient sectors during the economic recession.

Cable networks like ESPN are paid carriage fees by pay TV operators and also earn revenue from advertisers, but programmers have said that they would welcome new types of competition to the cable and satellite companies.

Microsoft has long held aspiration to be a major player in the TV business and has previously invested in MSNBC and interactive television initiatives including Web TV and MSN TV set top box software, MS latest plans include offering interactive features to engage viewers through social media, interactive advertisement and gesture technology by which you can change channels and fast forward through shows by waving your arms or speaking instructions.