From an exclusive story at Reuters it looks like Microsoft Corp has put subscription plans for broadcast television streaming to their Xbox LIVE platform on hold. Instead of becoming a replacement for cable, Microsoft is focusing on delivering cable programming via Xbox to already existing cable subscribers.

Similar to Netflix Inc, Microsoft’s service also would have allowed users the option of paying a monthly fee for a package of programming from someone other than a local cable or satellite TV company. But unlike Netflix, Microsoft had hoped to offer current shows and live networks on its service, which made it a much higher cost proposition.

According to much of the information coming from the recent revelation, the software giant has been in intense talks about content and pricing—but the content kept dwindling and the price kept rising. Eventually talks stalled on the point that Microsoft couldn’t countenance the licensing costs for the programming that they desired to jumpstart the service.

“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” involved in said talks.

The expectations of this program have been extremely high with the obvious direction that the software giant has been pulling the Xbox towards becoming an Internet media entertainment center moreso than just a video game console. It’s still up in the air if this change in Microsoft’s direction will affect their talks with FiOS TV/cable providers such as Comcast Cable and Verizon FiOS TV.

Not to be left behind, Microsoft is still working hard with content providers to deliver television programming via apps and the web—also accessible via Xbox LIVE subscriptions and Internet connection. For example at the Consumer Electronics Show this week Microsoft and News Corp announced a partnership that will stream Fox Broadcast, Fox News, IGN, and The Wall Street Journal via apps on the Xbox LIVE service.

With a multitude of Smart TVs and Google TV making their debut at CES 2012, this could be something of a completive sphere for Microsoft; especially if the company wants to make an impact in the market against devices that are being built directly into television sets.

The face-off is certainly coming in these departments alongside other streaming services such as Hulu, Netflix, and delivery by content powerhouses like Amazon.com and Google Inc. All of whom are being courted by various Web TV and Smart TV manufacturers to bring their content from the Internet into living rooms.

The Xbox has all the general-computing power necessary to run these apps but without the proper licensing, Microsoft wouldn’t have exclusive rights to much of the promoted content and therefore feel that they’re not getting the bang they want for their buck.

“This is an expensive business,” a second unnamed media executive said to Reuters, referring to the overall expense of Hollywood and TV endeavors—the making of programming, streaming, and delivery all collapse into the cost of licensing, but it seems that content producers could do worse than to get to their audience through Microsoft’s Xbox LIVE service.

With these talks on hold, we’ll see if Xbox LIVE’s entertainment push falls back to apps and licensing or if Microsoft will find a new way to push into the streaming television and movie ecosystem in a fashion that will capture an audience to make it profitable for all involved.