XBox 360 to stream Netflix movies

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The arrangement, revealed at the E3 Media & Business Summit in Los Angeles, will let Netflix subscribers stream 10,000 movies and TV shows to Xbox consoles for viewing on television sets, beginning this fall. Xbox had movies and shows available for download before, but only half as many.

"This generation of consoles will change the face of home entertainment more than any other generation before," said John Schappert, corporate vice president of Microsoft's interactive entertainment division.

As Microsoft vies for a stronger foothold in the living room, so is rival Sony Corp., which has tried to make its PlayStation 3 into a broader entertainment device by including Blu-ray high-definition DVD players in the consoles.

The deal with Microsoft also marks an important expansion for Netflix, whose 18-month-old streaming service which supplements its DVD-by-mail program has been available on computers instead of TVs, unless consumers had bought a small streaming device from a Netflix-backed startup called Roku Inc.

Microsoft already has sold more than 10 million Xbox 360 consoles in the United States. More than half of Xbox 360 owners pay $50 a year for a "gold" membership, which will be required for access to Netflix's "Watch Instantly" library. They also must subscribe to Netflix, which charges $9 per month for the least expensive plan that includes unlimited streaming.

In partnering with Microsoft, Netflix may be building the streaming service to prepare for the day when the convenience and widespread availability of video downloading kills its DVD-by-mail service.

Although Netflix Chief Executive Reed Hastings still believes DVDs will be around for years to come, he has already poured more than $40 million into developing the streaming service.

Until recently, Netflix's streaming service hadn't been a big hit with the company's 8.2 million subscribers, because there was no way to easily watch the movies on anything but a computer.

That began to change two months ago when Roku began selling a small set-top box that could stream to movies to any television set. Roku sold out its initial supply of the $100 player in just two weeks. The device is now back in stock.

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