While rumors of the Netflix service on the Xbox 360 are nothing new, when MSNBC runs a story in which Microsoft Live exec John Schappert gives the old "stay tuned" rather than "no comment" in response to the rumors, you can consider my interests piqued.

If Netflix were to somehow offer its unlimited streaming package over Xbox Live, as I wrote about a week ago, it could be the ultimate killer app. Just imagine Microsoft, recently harmed by news the PS3 was outselling them AND that their HD-DVD add-on was rendered useless with Toshiba backing out of the format, coming back with a vengeance with a Netflix deal. All of a sudden the device is the hot item again.

Of course that would be contingent on Microsoft securing an exclusive deal with Netflix and keeping it away from the Playstation 3 - who Netflix is also said to be considering a partnership with.

This would also be a huge win for Netflix which is looking better going forward now that we have one high definition format and this move would obviously take care of any digital distribution worries in a hurry.

We should know more tomorrow at the GDC in San Francisco, where none other than John Schappert will be giving the keynote. "Stay tuned".