From arstechnica.com:

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 "ŕ la carte" option that most cable companies have fought against despite consumer demand and pressure from the FCC.
Full Story: arstechnica.com