On the back of the success of Kinect, it seems that Microsoft is implementing plans to turn the XBox into more of a set top box. The platform already has Sky Player implemented and is deeply linked with Zune and the Zune Marketplace (The Microsoft equivalent to iTunes). But adding live channels would be an interesting step and result in yet another competitor in the ever more crowded race to own the eyeballs in the living room.
A more interesting model is that the XBox becomes a proxy set top box for existing operators such as cabelcos. It remains to be seem whether such intermediation by a company the size of Microsoft - and with a huge war chest - would be welcome by the incumbents.
Along with the launch of Tivo on the Virgin Media platform in the UK, this proves that the day of the stripped down STB is ending as the box goes the same way as mobile devices to become a veritable Swiss army knife of options and functionality.