This week, Microsoft will begin offering a preview version of the coming update to Xbox Live, enabling Zune Music, ESPN, and other features on its premier online service for consumers. The final version of this update will also support the Kinect addon, and while I don't have access to that hardware yet, I've been testing the update for the past week, and it's going to make the Xbox 360 a much, much better solution for the living room. Here's what I've found so far.

An updated UI

The first thing you'll notice with the update is that Microsoft has updated its so-called New Xbox Experience (NXE) user interface; let's call it the Newer Xbox Experience. From a high level, the UI is the same as before, with the same basic widescreen-friendly design, full of animating panels of information that can scroll left-to-right or up and down. However, the new NXE, so to speak, is much cleaner looking, with a flatter look and new colors. And best of all, that awful pseudo-3D look is gone, so that columns of panels no longer appear to fade into the distance. Hasta la vista, bad UI.

Overall, the new look is nice, and seems to flesh out what Microsoft accomplished with the original NXE. In this way, it's sort of like the difference between Windows Vista and 7, where the newer version is just a refinement of what came before but is in fact much more pleasing. It's hard to quantify why. But I like it a lot more than the old UI.

Zune Music

When Microsoft debuted the Zune service on Xbox 360 last year, I was a bit disappointed that it only provided video content (TV shows, movies, and music videos). This year, Microsoft corrects that mistake by adding the two Zune pieces that are, in my opinion, its biggest strengths: The music content (especially the Zune Pass subscription) and the playback UI from the Zune PC software.

This manifests itself in a new Zune Music experience that is part of a broader new Music Marketplace, which also includes last.fm, suggesting that additional music services (perhaps Pandora) could be brought on board in the future. The Zune Music experience, decked out in a pleasing Zune-ish purple and orange, provides access to featured content, Smart DJ (on-the-fly playlists based on artists you enjoy), Zune Social features (including your contacts and your own content and musical preferences), and music videos.

But where Zune really shines on the Xbox is in its integration to Zune Pass, the subscription service that provides members with streaming and download access to the several million songs Microsoft has in its Zune Marketplace. If you have this subscription, the Zune features really come alive, and Smart DJ will of course populate its playlists with Marketplace content that you don't need to own. You can also search for individual artists, albums, songs, playlists, or music videos, and stream content to the console in real time. So the next time you have a party, you can kick it off with music from a selection of millions of songs, not just the content in your own library.

Zune Pass also figures into other parts of the experience. While anyone can browse through the collection of new releases and listen to 30 second previews, Zune Pass subscribers can in fact stream entire albums of new music. There's a huge difference between sampling music in small bites and really discovering it. If you're a music lover, Zune Pass is a no brainer and now, too, so is the Xbox 360.

ESPN

Microsoft announced an exclusive partnership with ESPN back in June, and the fruits of that agreement are appearing in this year's Xbox Live update. What we're getting, basically, is live content streamed from ESPN3 and a series of clips from ESPN.com. Live content will include NCAA football and basketball, College Bowl games, NBA basketball, MLB baseball, soccer, golf, and tennis.

The presentation is, alas less than desirable and consists of an avatar-filled virtual room with giant TV screens in the back, each of which navigates to an ESPN channel. So the center screen is the live ESPN3 feed (displaying some stunning Zamboni footage as I write this), and then screens of other content, including, as of this minute, no limit hold 'em poker, Sportscenter, World Series of Poker replay, and then everything else (events, highlights and more). This last panel provides on demand events, upcoming events, featured highlights, and so on.

Playback quality is decent at best and suffers from the buffering and fuzzy video quality that marks web-based video. But if you're a diehard sports fan, this could be pretty compelling stuff, I guess. I happen to like sports quite a bit, but am generally interested in more interactive fare (i.e. games) when I turn on the console. I'm curious to see how this takes off with users.

Netflix Search

The Xbox 360 has always offered a first-rate Netflix experience, though it's the only device I know of that requires you to pay for a separate subscription (in this case Xbox Live Gold) in order to access it. But the issue with Netflix, on any device, has always been that the service never offers the full meal deal. That is, you can access your instant queue, which is pretty much the baseline, and over time they've added some interesting TV and movie discovery features like related playlists that are based on what you've watched or rated highly. But what's always been missing--still is, actually--is the ability to simply browse the entire library of Netflix streaming content from a device. To do this, you need to use the web interface on your PC.

The next best thing, of course, is search. And Microsoft is adding this ability to Netflix on the Xbox 360 while tweaking the UI to make it more usable. Microsoft looked to be the first to add Netflix search, to my knowledge, but then that's sort of moot since this feature isn't actually available publicly. And the new Apple TV that just arrived today does have Netflix support for the first time and, I should point out, search.

Anyway, search answers a lot of the complaints. What's interesting about this is that you can search for content on the console and if it's only available on DVD (i.e. cannot be streamed) you can then add it to your DVD queue. Fantastic.

Search also instant (as it is in Zune Music, by the way): As you enter letters using the horizontal virtual keyboard that appears at the top of the screen, panels fill out with relevant results. It's a nice effect, and it works quickly.

As for the subtle UI changes, Netflix of course adopts the nicer-looking and flat NXE look and feel, which is welcome. And the movie/TV show content pages are now single pages rather than a set of panels that recede off into the distance. It's a much nicer presentation.

Final thoughts

There are some Kinect-related bits in here that I can't really test, and while I'm not sure that Microsoft's new motion controller is going to kick off a new era of hands-free gaming, I'm curious to see how some more traditional interfaces (like Zune Music and Netflix) will interact with this device. But even without the Kinect, this year's Xbox Live update looks solid, cleaning up the NXE interface and adding some great new features, especially Zune Music. The Xbox 360 is obviously the best video game console on the market, but with this update, Microsoft is also making a compelling case for the Xbox 360 as the center of your digital media activities in the living room. I'll be writing a separate review of the Xbox 360 S, focusing on these capabilities, in the near future.

The late 2010 Xbox Live update will be made available broadly in November.