Microsoft is now flirting with making its Xbox 360 movie download service very nearly interesting thank to a new deal announced today with Netflix.

The software giant has scored a pact to stream a portion of Netflix’s movie library on its game console online network. About 10,000 movies and TV episodes will be available to rent from Netflix when it launches in late fall.

The deal was announced at the now-downgraded gaming dog and pony show, Electronic Entertainment Expo (E3).

Streaming content will be “free” to Xbox Live Gold members who are also Netflix subscribers. Or rather customers won’t be charged on top of paying for both premium services. Thank god for small favors.