This gives LIVE users access to Zune video marketplace directly from Xbox. It also provides interactive video viewing features such as Party mode, where you interact with up to seven friends through avatars and voice chat, while watching the same video.

High Definition video is available via Zune Marketplace via Xbox 360. The “instant-on” streaming experience delivers HD video up to 1080p video and 5.1 surround sound.

The seamlessness of using video across Xbox, Zune, and PC remains a challenge, but there is progress. U.S. TV shows, for example, can be purchased once and watched on your PC, Zune HD and on your Xbox. And it’s great to see Zune having a fingerhold in each of those three areas.

Zune on Xbox LIVE is a plus-up for Xbox users, but the real benefit here is for Zune. This makes the Zune brand and content more visible for millions of Xbox users worldwide. That’s a valuable mindshare to tap into.

Zune video on Xbox Live is now available in: United States, Canada, Australia, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland and the United Kingdom.

Moments ago, Microsoft lifted the covers on its plans to integrate Zune Video Marketplace with Xbox.

High-definition movies and TV shows from Zune Marketplace are being made available to 17 million Xbox LIVE subscribers. The previous Xbox video store is being merged into the Zune Marketplace video store. This is a significant extension of the Zune brand to the powerful Xbox platform.

Zune video on Xbox LIVE will show “instant on, smooth-streaming content”, in 1080p HD with 5.1 surround sound. Some details from today’s Microsoft keynote at the E3 (Electronic Entertainment Expo) conference in Los Angeles:

• Video startup is as close to instantaneous as possible by seamlessly transitioning between many different bitrates and resolutions of video
• Video playback will start at a low bitrate for fast download time and then ramp up to a higher bitrate and quality
• This process enables delivery of up to 1080p with 5.1 surround sound
• Enhanced search functions within Zune video on Xbox LIVE helps you easily find your favorite film or TV show

The service will be available in eighteen countries: US, Canada, Austria, Australia, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, and the United Kingdom.

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