Microsoft expands Xbox Live audio and video offerings

Microsoft announced a host of forthcoming media upgrades for the Xbox 360 at its E3 press conference Monday. The chief highlights: an updated video store, now using the Zune branding, that will allow instant-on 1080p video purchases of movies and TV shows; improved Netflix integration; access to Last.fm's streaming audio service; and expanded access to online video content in more countries around the world. (Disclosure: Last.fm is owned by CNET's parent company, CBS Interactive.)

For starters, the Xbox Video Marketplace will be rebranded as the Zune Marketplace. The pay-per-view movies and TV shows will be upgraded to 1080p (from their current 720p incarnations), and will be available as instant-on streams rather than "queue and view" downloads. Availability of the service will also be expanded from its current 8 countries to 18.

The Zune branding was hinted at last week when Microsoft announced the updated Zune HD portable media player. Despite indications of cross-linked functionality, the Zune HD did not make an appearance at the Xbox event, nor were any specifics on syncing between the Zune and Xbox provided.

To date, the Xbox 360 remains the only game console that officially supports Netflix's streaming service. But Microsoft showed off a much-requested Netflix enhancement: the ability to search available content and modify your queue on the fly via the Xbox Dashboard, obviating the need to manage your queue on a PC. (We'd be surprised if that feature doesn't end up filtering down to other Netflix-enabled products, just as Netflix HD video--which appeared first on the 360--was quickly added to all other Netflix products via firmware updates.)

While international audiences are often envious of U.S.-only media features such as Netflix (thanks to pre-existing contracts and usage agreements with Hollywood studios), it appears that the tables will be turned with a new Sky TV feature available only to Xbox Live subscribers in the U.K. and Ireland. The partnership with Fox's British counterpart will allow instant-on movies and TV shows, plus--the big one--streaming live TV.

Microsoft also briefly showed a "party mode" that would allow subscribers to enjoy video content simultaneously, with Xbox Live avatars shown "watching" a picture-in-picture broadcast. It was unclear when and how this function could be implemented, as well as whether it would tied into the extensive Facebook and Twitter integration with Xbox Live that Microsoft also highlighted at the event.

On the audio front, Xbox Live users will be getting access to Last.fm's streaming audio service.

Also, the dearth of any Hulu talk at the press conference effectively confirmed that last week's already debunked rumor was just that.

All of these updates were said to be coming to the 360 in the fall of 2009. The Last.fm and Netflix functions will be accessible only to Xbox Live Gold subscribers (Last.fm requires no additional charge; Netflix streaming is currently available to Netflix subscribers on the one-disc-at-a-time or higher plans.)

Editor's note: this post was updated at 12:43 p.m. PDT with greater detail on Microsoft's announcements.