Games on Demand, Netflix parties, Avatar Marketplace in next XBL update

While Project Natal and the Xbox 360 debut of Metal Gear Solid stole the show at Microsoft's Electronic Entertainment Expo media briefing, not everything the company revealed was so far off in the future. Some of those plans are nearing fruition, as Microsoft has confirmed a handful of additions to Xbox Live that were revealed at E3 will be included in the next update to the Xbox 360 online service.

First off, the Netflix movies-on-demand functionality is getting an overhaul, starting with the addition of movie parties. Xbox Live Gold users will be able to pack a "virtual theater" with avatars to re-create a more traditional theater-going experience, complete with patrons talking amongst themselves and throwing popcorn around the auditorium. Netflix users will also be able to manage their movie queues through Xbox Live, and Microsoft is promising streaming upgrades for overall smoother playback.

The Avatar Marketplace will also open its virtual doors with the next update, allowing players to purchase new clothing and items for their Xbox Live counterparts with Microsoft points. Some of the objects for sale will be pulled from popular real-world brands, while others will be game-centric (Microsoft used Halo gear as an example). At last month's E3, Microsoft tentatively priced some avatar items, with a T-shirt running for MSP80 ($1) and an "interactive prop" going for MSP320 ($4).

Screenshots of the update posted on Gamercyde appear to show entire themed wardrobes, with an 11-piece Steampunk ensemble offering a jacket/shirt combination for MSP160 ($2, pictured above). The authenticity of the images had not been verified by Microsoft as of press time. For those who like playing virtual dress-up but don't want to part with real money (or even Microsoft points) to do it, developers will also now be able to award avatar wear to players for completing tasks within games.

The update will also properly introduce Microsoft's Games on Demand service. The section of Live formerly known as Xbox Originals is being renamed in order to accommodate downloadable versions of retail Xbox 360 games. The list of specific titles to be included in Games on Demand hasn't been revealed yet but will be listed--along with downloadable and printable manuals for each title--on Xbox.com.

Not all of the additional Xbox Live functionality announced at E3 is just around the corner. Microsoft made no mention of added integration with Twitter, Facebook, and GameSpot sister-site Last.fm in regards to the next update, suggesting those will instead be incorporated in future revisions.

Microsoft hasn't set a release date for the next Xbox Live update, but it will start showing it off in preview form to the media and select community members next week.