Our take...
The launch of these new features continues the transition of the Xbox 360 from a gaming platform to a centralised entertainment hub.

The improvements to the Xbox's video store, particularly instant on streaming, will likely encourage uptake. Xbox has already captured a significant share of the online movie market in the US and UK and these upgrades should help to maintain that position.

In addition, the Zune video store is launching in several countries which do not yet have a meaningful digital movie sector. Screen Digest expects that the ability to stream movies direct to the TV through the Xbox 360 will help to kickstart these markets. As a result of Microsoft's territorial expansion, Zune video can be accessed in 18 countries, far more than its main rivals in the sector. Apple's online movie store is operational in six countries while Sony's PlayStation Network will be available in five from the end of November 09.

For all three major players the sale of online movies is unlikely to evolve into a core profit centre. Service provider margins on transactional movies are relatively low – for a rental title around 60 per cent of consumer price typically goes to the content owner and wholesale prices for digital retail can exceed 100 per cent of consumer price. But the provision of digital content is designed to boost a higher margin area of each company's business. For Apple this takes the form of hardware sales, for the console manufacturers the goal is to increase their presence in the home and drive software purchases.

While all Xbox Live users can buy movies through the Zune video store, only Gold subscribers can use Facebook, Twitter or Last.fm through the console. This strategy continues Microsoft's push to upsell users to a Gold package, which costs $49.99/year in the US (or, for example, £39.99 in the UK). Other services only available in this subscription tier include Netflix streaming in the US and Sky Player in the UK.

Persuading users to upgrade to a Gold subscription has the potential to be more lucrative for Microsoft than sales through the Zune video store. A user would need to rent 30 standard definition new release movies per year to generate the equivalent revenue brought in by an annual Gold subscription.