Xbox 360 = online video downloadsOwners of Microsoft’s Xbox 360 will soon be able to watch and download a range of movies and TV shows through their consoles

Microsoft has announced that it plans to rival Apple by renting and selling downloaded movies and TV shows through Xbox Live, though the video service may well be more about the console wars with Sony’s PS3 and Nintendo’s Wii.

In partnership with media giants including CBS, MTV and Warner Brothers, Microsoft’s Xbox Live service will offer a line-up containing more than 1,000 hours of TV and movies to US users by the end of the year.

The new Xbox video store is comparable to Apple’s video service, though the two companies have very different business models.

Analysts have suggested that Apple makes more profit by selling massive volumes of iPods than from the iTunes store. Microsoft, on the other hand, makes a loss on selling the Xbox 360, but makes up for this by selling games via Xbox Live, and will now do so by offering videos.

The Xbox links straight to your TV without the need for a PC so, for viewing videos, the service is more user-friendly than Apple’s offering, though Xbox users cannot transfer the content to a portable device.

This new service may push rivals’ noses out of joint, particularly Sony and Nintendo, with their next generation consoles, the PS3 and Wii, due out shortly. This new addition to the year-old Xbox may help see off the threat from these new consoles. It looks like one in the eye for Apple as well.

Online DVD rental companies may be less concerned, for the moment at least. While the convenience of plugging an Xbox straight into your TV and watching movies is a huge plus point for Microsoft; both online and offline rivals, such as Amazon or Blockbuster, currently have a broader range of content on offer, and more players are set to enter the online video market.

Shane Kim of Microsoft Game Studios acknowledges that this launch is about competing with Sony and Nintendo:

“For us, this is about competing in the video-game space, we have significant competition in our space, and we think that adding these capabilities clearly adds to our value proposition for those customers.”

Watch this space.