In a talk with Bits about what Xbox "want[s]to be when we grow up," Microsoft's Shane Kim clearly has video on the brain. With Netflix, he says, they're "just beginning to scratch the surface."
As examples, Kim mentions watching pro sports games on the Xbox while chatting with your friends, and reveals that they're thinking about adding a music service. (Zune? Hopefully not another service.)
Here's where it gets interesting—Kim says they're not planning on a browser or anything that completely busts open the Xbox. Rather, Kim says ""We are about delivering higher quality experience, not having the most varied experiences." Bits (unfortunately) paraphrases the next part:
He argued that while there may be hundreds of video sites, most of the activity is concentrating on a handful of sites like Hulu and YouTube. So his first instinct is cut a handful of deals that integrate the Xbox more deeply into such sites.
Hulu on the Xbox 360 totally would be a "higher quality experience"—one that would blow our mind. The deal would make sense for both parties too: It's no different than the integrated Netflix service on Microsoft's end, and it would turn the system into the most serious, fantastic video box around (important, since PS3 has the Blu-ray advantage on the video front). For Hulu, it would be a huge opportunity to blow up their audience and advertising revenue.
Of course, it's entirely possible, if not probable Kim was just spouting off examples and no Hulu deal is in works. But, if Microsoft really is looking at every good option, surely they're looking at Hulu. They've already done tons of deals with Hulu parent NBC, and they've never been afraid to pay up to get what they want. We know it's what we want, so we hope where's the smoke, there's hot, streaming fire. [Bits]