Microsoft Corp. (Nasdaq: MSFT)'s broadband-fueled Xbox 360 console wants to be your next set-top box.

Speaking at a Microsoft financial analyst conference on Wednesday, company CEO Steve Ballmer gave a preview of Xbox TV, an update that will enable the console to deliver not just on-demand content but a number of live TV channels, as well. Microsoft plans to launch Xbox TV in time for the 2011 holiday season.

Microsoft hinted at its live TV streaming plans for the Xbox 360 at the E3 conference in June. (See Xbox 360 to Stream Live TV.)

Ballmer reportedly didn't offer much detail about pricing, content or who its initial partners will be (the Seattle Times posted a Microsoft slide that supplies some bullet points), but did note that Microsoft would be working with "dozens or hundreds of additional video content suppliers." He didn't offer a list of networks or MSOs that will be among Xbox TV's initial U.S. partners, but noted Microsoft would package in "news, sports, and your favorite channels."

Microsoft will also let users navigate for video using Xbox's motion-based Kinect system and use Bing to help users find and discover content.

Why this matters
With a an Xbox Live user base in the tens of millions, Microsoft probably has a customer base that's large enough to support a trimmed-down video subscription service that would be appealing to potential cord-cutters, but that's not what Microsoft has in mind.

Instead, it appears that the plan is to integrate the Xbox 360 with MSOs and other pay-TV operators so their subscription video services can be delivered to the gaming console over IP (and using software-based security instead of a clunky CableCARD)-- essentially replicating what Samsung Corp. and Sony Corp. (NYSE: SNE) are already trying to do with cable operators via their new line of connected TVs. Cable MSOs have incentives to strike such deals as they look to avert AllVid, a "notice of inquiry" at the Federal Communications Commission (FCC) that's threatening to become a rule-making effort that would succeed today's CableCARD rules and apply to all domestic pay-TV operators.

Microsoft and the Xbox 360 have some experience in the live TV arena, having already done some similar kind of work with Sky TV in the U.K. and with FoxTel in Australia that lets the Xbox stream a limited number of linear channels.

In the U.S., Microsoft has completed full Xbox 360 integrations with AT&T Inc. (NYSE: T)'s U-verse and with Telus Corp. (NYSE: TU; Toronto: T) in Canada. Both require specialized hardware kits, with AT&T charging $99 for the option, while Telus charges $50.

For more
For more about Microsoft's video ambitions and cable's flirtations with the CE industry, check out.

— Jeff Baumgartner, Site Editor, Light Reading Cable