With the deal in place, Live users will be able to access Netflix's library of streaming content -- access that's free to members of both.

Thus far, Microsoft has made only tentative steps in the direction of making living room e-commerce a reality, with a library of films seemingly (and bizarrely) comprised in large part by old releases from Troma Entertainment, of "Toxic Avenger" fame.

While we all love Toxie, the fact that cult films (to use the term loosely -- "Toxic Avenger" is by far the best of this category, which includes some truly awful efforts at moviemaking) made up a significant chunk of Xbox Live's movie store has never really boded well for the service.

Microsoft also announced a second content deal: This time, with NBC-Universal, for downloads and rentals from the media giant's stable of standard and HD content.

Efforts by Microsoft to beef up its video content distribution channel have another benefit: helping Microsoft shake off the loss of HD-DVD. It's unclear how much HD content will be delivered through the Netflix deal (through which Microsoft becomes the exclusive game console maker offering Netflix access).

Still, Microsoft has already proven itself of delivering a capable HD video download service... a service that, despite its offbeat selections, is far more reliable than some of the video artifact- and timeout-ridden VOD offerings from cable companies. (Time Warner Cable, I'm talking about you.)

And, heck, expanding and driving more traffic to the Xbox's content offerings may also help Zune sales somewhere along the way -- assuming Microsoft still wants to continue competing with Apple in the portable media player space. There are various ties between the Xbox and the Zune (not the least of which is that J Allard oversaw development of the Xbox and now heads up work on Zune) and it's likely Microsoft will seek out even more.

I should also point out that it's unclear whether the agreement with Netflix is the first step in a larger relationship between the two companies.

More to come, no doubt.