Operating System giant Microsoft is rumored to unveil Xbox subscription TV service at the upcoming E3 to be held in Los Angeles, a report said.

The project, called Xbox Live Diamond, will merge Microsoft's Mediaroom IPTV (Internet Protocol Television) with Xbox Live. This will integrate television streaming from different content providers who are in partnership with Microsoft.

The plan could also combine the interactive feature of the Xbox Live with the motion-based controls of Microsoft's Kinect hardware.

The feature, which has been rumored by several media companies, can easily become a virtual cable operator. Users who are already subscribed to Xbox Live will have to pay a premium to access the new Gold service which would let them stream shows and channels. The pricing structure to access is still unavailable.

The company is also reportedly weighing the option of delivering additional branded channels to its current ESPN service which provides on-demand content to the users, says a report in Think Digit.