Pachter: Xbox Live getting Netflix'd

Little wonder, then, that during a recent summit in San Francisco, Netflix executives were hyping up other delivery channels besides the Roku box to analysts; analysts like Wedbush Morgan Securities' Michael Pachter, who left the event convinced that Netflix is on the verge of announcing a deal with a major console-maker.

"As we have speculated in the past, we believe that one of Netflix's partners is Microsoft," said Pachter in a note to investors. "We arrive at this conclusion based upon Netflix management repeatedly mentioning 'Internet-enabled video game consoles' [at the event]. While there are three such consoles, only one (Microsoft's Xbox 360) has a sufficiently large installed base to make sense from a streaming partnership with Netflix."

Pachter continued, "The competitive advantage of such an alliance is clear: Netflix customers who are Xbox Live members will have the ability to stream online content through their Xbox 360s directly to their televisions. The ability to do so is available without the Xbox 360, but requires a measure of technological sophistication and a high tolerance for failure."

When contacted by GameSpot, Microsoft reps repeated their favorite mantra, saying "We don't comment on rumors." A senior Netflix representative seconded the sentiment, saying only "We don't comment on speculation."

However, if a Microsoft-Netflix deal is announced in the weeks before the looming E3 Media & Business Summit, it will raise a host of questions. Would such a service require 360s equipped with hard drives? Would such a service replace Xbox Live's current film-rental service or complement it?