Remember about two years ago, when Netflix for the Xbox 360 was awesome? Other than the Roku, there really weren't any set-top boxes with Netflix access, and the Xbox's version really was the best user experience. At the time, Microsoft negotiated an exclusivity with Netflix where Microsoft would have the only console with Netflix software for two years. Well, that was groovy, but not exactly in line with Netflix's plan for world domination, so pretty much before the ink on the exclusivity contract was drying, the company figured out a way around that restriction by shipping disks with the software to the Wii and PS3 owners. Technically, the software was on the disk, not the console (wink, wink).
Well, now the charade can come to a close, as the exclusivity contract has ended, and both the Wii and the PS3 now have Netflix software available for a free download in their respective stores. While this is a neat perk for the Wii owners, I don't think it really matters much for Nintendo in this upcoming holiday season. Pretty much everyone that wanted a Wii has one, and the fact that the Wii can't do HD makes it less attractive for a home theatre set-top box. Oh, and the other two added fancy motion controls too.
However, this development does affect the future of the Xbox 360 and the PS3. Namely, as a non-gaming device, the PS3 has totally surpassed the Xbox 360 (which may be a moot point, but more on that later). Let's compare. The Xbox 360 requires users to pay for a Gold subscription for their services. If you pony up, you get access to a decent Netflix app, eventual access to ESPN3 sports content, and... that's it. Without paying a dime beyond the price of the console, a PS3 purchaser gets a top of the line Blu-Ray player, probably the best Netflix set-top software on the market (including search and the only offering of 1080p HD video with 5.1 surround sound). Eventually, a non-paying user can have access to Hulu Plus, which, combined with Netflix, makes dropping cable a much easier decision (this is currently available for PlayStation Plus subscribers). If I were buying a console for its home theatre prospects, the PS3 wins hands down.
Keep in mind that both consoles just launched their "Wii-too" motion offerings, with PlayStation Move and Microsoft's Kinect. The latter is certainly the cooler offering, but both are a bit pricey for casual audiences. If SONY strategists play their cards right, they can make a case for the PS3 as the market's best set-top box that also has games. This may be a more effective strategy in entering the market right now than just trying to out-Wii the Wii. Ultimately though, as mentioned above, this is only pertinent for the next six months.
Game consoles have a huge threat from the likes of iOS and Google TV. Especially the latter. Sometime early next year Google TV devices are going to get apps. Which means games. Think Angry Birds on the TV set, possibly using an iPhone or Android device to control the slingshot. Unless the PS4 is going to be running Android (which isn't too unlikely, considering how tight SONY and Google are right now, and the rumor they are making a PSP phone), Nintendo, Microsoft, and SONY are going to be seeing a holiday 2011 threat from Google and Apple for casual markets.