Xbox TV: Is Microsoft building an Apple TV competitor?

Microsoft (s MSFT) is building a TV set-top-box based on Windows 8, according to a report from the Verge. The device will offer consumers access to online video and TV services also found on the Xbox 360, plus some casual games. Microsoft is planning to release the device in time before the 2013 holiday season, according to the Verge.

The set-top-box will reportedly complement Microsoft’s next-generation gaming console, which has been dubbed Xbox 720. The idea is that heavy gamers will buy the gaming console, whereas more casual consumers will be steered towards the set-top-box device.

We reached out to Microsoft on this, and the company sent us the same canned response also quoted by the Verge:

“Xbox 360 has found new ways to extend the console lifecycle by introducing controller-free experiences with Kinect and re-inventing the console with a new dashboard and new entertainment content partnerships. We are always thinking about what is next for our platform and how to continue to defy the lifecycle convention.”

But there are good reasons for Microsoft to go down this route. Online video and TV content has proven to be hugely popular on the current-generation Xbox360, with consumers already spending more time-consuming entertainment content that playing games on the device.

However, it’s doubtful that many consumers would spend $300 or more on a next-generation Xbox game console just to watch Netflix (s NFLX) and Hulu Plus, especially as devices like Roku and Apple TV offer access to the same services for far less. Targeting consumers outside of the core gaming audience with a slimmed-down and presumably much cheaper device would make a lot of sense.

Microsoft has already taken some steps towards widening the reach of the Xbox brand in recent months: In October, it relaunched its own music offering as Xbox Music, and it also re-branded its video-on-demand offering as Xbox Video. I would be surprised at all if the company was going to unveil a set-top device dubbed “Xbox TV” in the coming months.