Microsoft has put its talks with media companies about an online TV subscription service on hold, according to Reuters. Microsoft had been in talks with potential programming partners for over a year and was hoping to roll out the service in the next few months. But it has pulled back after deciding that the licensing costs were too high for the business model Microsoft envisaged, according to these people.

Microsoft’s TV service was to include a range of advanced features incorporating Kinect for voice and motion control. Unlike Netflix, Microsoft had hoped to offer current shows and live networks on its service, which made it a much higher cost proposition.

Microsoft is still working closely with the TV business to distribute shows over the Web, but rather than playing a role in helping consumers replace their cable TV packages it is focusing on delivering programming via its Xbox gaming system to existing cable subscribers.

At CES Microsoft and News Corp announced a partnership that will allow Fox Broadcast, Fox News, IGN and The Wall Street Journal to offer apps on its Xbox Live service.

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