Many Netflix subscribers will find a rather inconspicuous red envelope in the mail today. It may look like a standard Netflix package, but inside PS3 owners will discover the "Instant Streaming Disc" which enables Netflix's instant streaming service on Sony's console.

We've embedded a video overview of the service above. We'll admit that there are a few qualms with the presentation so far. First, the activation process is slow and requires the use of a computer -- there is no way to activate Netflix directly from the PS3. (You won't be able to use the PS3 internet browser for activation purposes either.) Second, the loading of cover art is suspiciously slow. Finally, there is no way to directly manage your Queue from the interface. While you'll be able to browse various categories, there is no Search capability. One benefit the PS3 has over the 360 in this regard is the built-in browser. You will be able to use the PS3's internet browser to manage your Queue. It's a baffling additional step, but it certainly is an added convenience. (ProTip: Use SELECT to add a bookmark to your PS3 internet browser.)

While the previous video we posted suggested otherwise, we can confirm that HD video works on PS3, and it works well. In fact, it's a bit faster than watching SD content, simply because you won't have to wait for the PS3 to switch between resolution modes. When browsing your queue, look for a tiny HD icon at the bottom of the screen to see if it will play in high-def. (The selection can be quite limited.) When judging the overall experience, however, we'd say starting movies required a longer buffer than when using the service on the 360 or PC. Netflix is a terrific value-add for the PlayStation 3, but minor interface issues make it clear that there's a lot of room for improvement -- perhaps when Netflix becomes a standard built-in feature of the OS next year?

Tipster Otis got the Netflix PS3 streaming disc in the mail today and set immediately to work capturing it, providing the first look at what we'll all be checking out later today. After the break, you can see (but not hear -- there's no sound in the recording) what the PS3 Netflix interface looks like.

Unfortunately, the early report of the service doesn't sound quite perfect. Otis says in the YouTube description that all video renders at 480p and doesn't scale properly. We'll be testing these claims ourselves when we get the chance to check out the service. Let us know with a comment if there's any other feature of the PS3's new Netflix capability that you'd like us to investigate!

[Thanks, Otis!]

If you're a Netflix user and haven't bothered to sign up for the free disc that enables Netflix streaming on your PlayStation 3, you should go do that. Like, right now. Netflix just sent out emails indicating that the discs are shipping today, and if you have yet to indicate your interest in the service, your disc is obviously not going out today.

And that means you may have to watch The Water Horse: Legend of the Deep on your computer instead of on the television, where it belongs. Do you want to be the one to break that news to your family? Of course you don't.

Netflix is confident that it will have ample supply in November for every PS3 user who requests a disc for its recently announced streaming service. Speaking with Joystiq, Netflix Vice President of Corporate Communications Steve Swasey wouldn't disclose the number of reservations the company has received for the free PS3 Netflix disc since the company announced the program on Monday, but did emphasize, "We're confident we've produced enough discs." Distribution centers apparently already have the units.

Swasey told us that the company is still hammering out the distribution details, but the plan is to send out a press release sometime in November announcing that the discs have shipped. Customers should receive the red envelope in about the same time it usually takes for a Netflix shipment to reach them. He expressed that "there's no VIP list or special circumstance list," so everyone should be receiving it around the same time.

Netflix was kind enough to answer a heap of nitpicky questions following the announcement that its steaming service would soon be available for PlayStation 3. Certainly, question marks hovered over the application "disc" and whether or not it would have to always be in the PS3 to use the Netflix streaming service. It turns out that Netflix won't have an integrated XMB solution just yet -- but it's coming.

Check out our interview with a Netflix representative for the full details:

Joystiq: Was the PS3 application developed internally by Netflix?

Netflix: Yes, with the help of the Sony team.

Can the Netflix application be installed to the PS3 hard dive from the disc? Or must the disc be inserted every time a user wants to access Netflix?

So this is why Netflix's stock went soaring. After countless rumors, Netflix's streaming service is finally coming to the PlayStation 3. Even better: it'll be free for PlayStation Network members that have a Netflix account. According to the press release, "Netflix expects to begin streaming via the PS3 system next month at no additional cost to Netflix members in the United States who have a PS3 system."

It looks like you'll also be able to manage your Netflix streaming queue directly from your PS3; no need to have accessed the site via computer first. It'll be interesting to see how Microsoft responds to the loss of Netflix exclusivity -- perhaps it will open up the service to free Xbox Live Silver accounts? And will Nintendo ever join the fray?

Update: Michael Pachter of Wedbush Securities noted that the Blu-ray disc required for Netflix playback on the PS3 may circumvent exclusivity clauses instituted by Microsoft. "We believe that the exclusive arrangement limits Netflix's ability to appear on the 'dashboard' for the PS3 or the Wii." Additionally, Pachter believes Netflix streaming will expand to Nintendo's console next year. "We anticipate that a similar arrangement will be announced for the Wii in the next 12 months."

Netflix's stock hit a new high today on word from the company that its movie streaming service will soon be available through a device owned by a large number of consumers. The company wouldn't name names, but the Associated Press reports that analysts are speculating it to be the oft-rumored and Hastings-desired inclusion of the service on the PS3 or Wii.

Netflix stated that its Xbox 360 service helped the company add 2.4 million subscribers since September of 2008. This new deal, according to the company, is predicted to bring in 900,000 to 1.2 million more customers in just the fourth quarter -- it also announced it will begin offering the service overseas next year.

Before getting too excited, Netflix could be offering its service through a cable provider like Comcast or DirecTV -- perhaps the iPhone? We've contacted Netflix for further information and asked when it plans to make its big announcement.

Over at IndustryGamers, everyone's favorite video game predicterer (we're still working on that one) Michael Pachter has taken the reigns of the site and offers his own extensive diatribe on the future of Sony and Microsoft's upcoming new tech: Project Natal and the PlayStation Motion Controller (rumored to be called Sphere). Pachter's assertion is that price will be Natal's biggest selling point and Microsoft will try to expand upon its market of established Xbox 360 owners by offering the device for $50. For Sony's doodad, Pachter says the company is "trying to create an answer to the success of the Wii."

Pachter even likens the future state of a Natal-enabled Xbox 360 to the current state of the iPhone -- with features like Twitter, Netflix, Last.fm and Facebook inside Microsoft's box and its intuitive interface, he says casual or non-playing members of Xbox 360 households will become interested. And then when it's bundled with all new Xbox 360s, he says that'll expand Microsoft's reach even more.

For the motion-controlled competition, Pachter says he'd be surprised if Sony's asking price was over $100, and stresses that both Microsoft and Sony need to keep "the consumer's cost relatively low in order to achieve broad penetration."

[Update: Corrected Pachter's belief that the motion controller would be no more than $100. We sincerely apologize for the misinterpretation and the consequent misinformation.]

Back in April, video game rental service GameFly filed a formal complaint against the United States Postal Service for supposedly offering preferential treatment and care to Netflix and Blockbuster parcels, and none to its equally fragile mailers. Now, GameFly is petitioning for information relating to "Netflix-only" drop boxes present in certain post offices. Though the USPS filed a directive to employees two years ago mandating that these boxes be taken down to avoid legal ramifications, GameFly presented photo evidence of Netflix slots remaining in two California post offices.

GameFly has also continued its original complaint, claiming parcels from larger DVD rental services were being manually sorted to prevent damage and breakage. The USPS responded with a curt "all DVD mailers are not equal," and suggested that GameFly update its disc packaging to better protect its product.

When asked for comment on the complaint, a GameFly representative said, "Unfortunately, we cannot comment as it is a legal matter."

[Update: For visual aid, we've received the above image from a reader whose post office most certainly does sort Netflix and Blockbuster DVDs separately. He said they don't include GameFly DVDs because the rate at which encounter them "is much lower." Well, look at that.]

[Via GamePolitics]