According to inside sources with knowledge of the discussions surrounding Microsoft’s plans for an online media subscription service, Microsoft TV, the console maker has decided to put said talks with media companies on hold for financial reasons.

The insiders allege that Microsoft has decided licensing costs for the service, which the company had been pushing hard with potential programming partners for over a year, were too high to meet its envisioned business model. The high cost is being attributed to the fact that Microsoft wanted to offer current popular shows and live networks on Microsoft TV instead of waiting as Netflix does with its service.

“They built Microsoft TV, they demoed it for us, they asked for rate cards but then said ‘ooh ah, that’s expensive,'” a senior media executive who was engaged in the talks stated.

It’s a bizarre twist following Monday night’s reveal that Microsoft had struck a deal with News Corp. to feature FOX, Fox News, The Wall Street Journal, and IGN Entertainment on Xbox LIVE. However, that deal involved the creation of apps for each individual property on the LIVE service and no mention of Microsoft TV was found in the announcement.

It could very well be possible that the major tech company has decided to use Xbox LIVE and its apps section to fill in the void for Microsoft TV at a cheaper price and more announcements similar to the one with News Corp. could be coming in the future. Media company sources though still believe that Microsoft may come back and try to negotiate a better deal and revive the service.

“It doesn’t mean they won’t be back in another iteration,” said the senior media executive. “We’ll have to wait and see.”

A representative for Microsoft declined to comment on the news.

[Reuters]