If you have an Xbox 360 and you're thinking about buying an Apple TV, forget about it.

If you're in line at the Apple Store with a $299 Apple TV box in your hands, reconsider it.

If you are at all interested in video games you might be better off purchasing a Xbox 360 core system for the same price and getting just about all the Apple TV functionality plus a pretty nice game system to boot.

I've been writing for a little while now that I thought Microsoft was sticking it to Apple in the living room arena (and this is coming from someone who could be described as an Apple Fanboy), but I only just recently wrote about my high-hopes in testing out a program for the Mac called Connect360 - well I did, and it's awesome.

My delay in writing this was simply that version 3 of the software worked great for streaming pictures and music from my iMac to my 360, but it would not allow me to play videos. Well, yesterday Nullriver release the updated 3.1; I just installed it, booted up my 360, went to my videos folder and boom! - completely seamless playback of h264 encoded videos.

No hiccups during playback, the ability to stop, go do something else on the 360 (even play another video), and come back and it'll remember where you were, a great picture - it's all here.

Now a few notes, my files were ripped from DVDs as I said using the h264 codec with the newest version of Handbrake. I encoded my files at a 1500 kbps average bittrate. I'm streaming them wirelessly from my iMac in one room to my 360 (which is using a wired connection to my router) in another room over a standard 802.11g signal (not the new draft-n).

Simply put, the picture is better than any I've seen on Apple TV setups at multiple Apple stores - and on a bigger TV no less. Now maybe this has to do with Apple's own movie encoding or maybe it has to do with the setups in the Apple stores, but the point remains - why would you buy an Apple TV for $299 if you could get an Xbox 360 that will do the exact same things PLUS is a video game system for the same price (or a just a bit more if you want the hard drive versions which for this aren't necessary).

The only thing I can give Apple is that the Apple TV is smaller, does look nicer, and run quieter. Other than that I see absolutely no point in buying one now.

If enough people come to the realization that I have (which they may come the massive release of Halo 3 in September), Apple could have a legitimate problem on its hands as not only will people stop buying Apple TVs, but they may stop buying movies on iTunes in the protected format when they can simply (though at this point technically illegal) rip their own DVDs and get a much better result.

I don't say it a lot, but I think Apple made a drastic mistake with the Apple TV. Steve Jobs and Co. simply thought a device to stream movies (and music and pictures) to your living room was worthy of separate $299 purchase. It is not. To their credit, they probably also thought that iTunes movie downloads were going to saturate the market much more quickly then is happening.

But those iTunes movies are still also stuck in less-than DVD quality when the market is quickly moving to high definition video. What do you have built-in to the Xbox 360?... The Xbox Live Marketplace where you can download movies in high definition. And let me repeat, that is built-in, with the Apple TV, you still need a computer to download the movies from iTunes. There is also the rent vs. buy argument which I think Apple is on the wrong side of as well (but could be coming around shortly).

It's really no contest. I'm pretty shocked, I've never seen Apple handed their hat so forcefully on a product - and by Microsoft no less.

Apple needs an answer. Perhaps as I've suggested before, a new version of the Apple TV that is an Apple TV/Mac Mini hybrid which a huge hard drive (we're talking terabyte[s] huge) and deals in place with the studios to allow you to rip your own DVDs to it. That could save the device, but really that would be nothing at all like what the current Apple TV is.

As we speak I'm unlocking the full version of Connect 360. It's $20, but worth every penny if it'll save you the $299 for an Apple TV. 360 and Mac owners download the trial version of Connect360 (be sure to get the 3.1 release) and try it out for yourself. If you have an Apple TV as well, you might just be tempted to throw it away.