Apparently the cost of getting content onto the service is just too much at present.
We've been hearing for at least a year that Microsoft is planning to launch a subscription TV service to compete with cable and satellite providers, but it seems a wrench has been thrown into the works - Microsoft didn't expect the price of licensing to be so high.
"They built Microsoft TV," says one senior media exec. "They demoed it for us, they asked for rate cards but then said 'ooh ah, that's expensive." For now, it seems plans will be put on hold, surely disappointing for some Xbox 360 owners.
Microsoft has been working on this for a while though, so you can bet they're going to bring it to fruition one way or another. Perhaps at this year's E3 we'll see what the company has in store.