Speaking after a Netflix analyst event in San Francisco, Wedbush Morgan Securities analyst Michael Pachter is convinced that the movie rental company will soon team up with Microsoft over Xbox Live.

As reported by GameDaily, Pachter said in a research note:

"The company is investing heavily in building its online streaming capability, to the point where it is a market leader, and a desirable partner for consumer electronics companies that hope to participate in digital media convergence in the near term.

“As we have speculated in the past, we believe that one of Netflix's partners is Microsoft. We arrive at this conclusion based upon Netflix management repeatedly mentioning 'Internet enabled video game consoles.' While there are three such consoles, only one (Microsoft's Xbox 360) has a sufficiently large installed base to make sense from a streaming partnership with Netflix.

He continued, "The competitive advantage of such an alliance is clear: Netflix customers who are Xbox Live members will have the ability to stream online content through their Xbox 360s directly to their televisions. The ability to do so is available without the Xbox 360, but requires a measure of technological sophistication and a high tolerance for failure."