Microsoft Corp has struck a deal with Walt Disney Co's ESPN network to broadcast live sporting events -- for free -- into U.S. living rooms through the Xbox 360 games console, bypassing traditional cable providers.

Live games will be broadcast through Microsoft's Xbox Live service, and will be offered at no additional cost, executives said at the E3 games convention on Monday.

Microsoft's ambition -- despite its spotty track record of engaging consumers outside of gaming -- is to make the Xbox, which competes with Nintendo Co Ltd's Wii and Sony Corp's PlayStation, the nexus of household entertainment.

It already offers Netflix movies and Zune music and videos through its Xbox Live online subscription service. There has been talk that it will announce a deal to add Hulu TV shows to the service at E3.

Shares of Microsoft edged down 2 cents, or 0.08 percent, to $25.64 on Nasdaq at mid-afternoon. Disney's stock was down 0.6 percent to $34.03 on the New York Stock Exchange.

(Reporting by Franklin Paul and Gabriel Madway; Editing by Richard Chang)

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