Microsoft (NASDAQ:MSFT) plans to make an entertainment brand out of its Xbox video-game console since 40% of the time people are using the machine’s multimedia functions, purchasing access to movies, television and music, rather than just playing games.

The company is expected to reveal a new cable-style television service for the Xbox and its premium subscription service Xbox Live, which gives access to Web-based but also television and movie service like Netflix’s (NASDAQ:NFLX) streaming video.

What then will happen to Netflix, which saw its streaming-video service rise to prominence thanks to its availability on machines like the Xbox, while its massive jump in subscribers over the past two years was helped by the lack of competition.

Now, Netflix needs to embrace video games through its streaming media business.

There are two ways it can do this: Netflix can invest in developing data processing facilities for streaming video game content and hope, in turn, that partners like Microsoft, Sony (NYSE:SNE) and Apple (NASDAQ:AAPL) allow them to host the service on their devices as they have with Netflix streaming video.

A better solution would be to acquire an existing streaming video game service. OnLive, an on-demand streaming gaming business, hasn’t exactly set the world ablaze since opening for business in June 2010, and it’s still too limited in its availability, and too unknown by consumers. If Netflix bought the company and its network of data centers in the U.S., it would have a ready-made infrastructure that it could help develop and then market with its popular and recognizable brand name.

As of February, OnLive was valued at around $1.8 billion. A steep price to pay, but one Netflix should begin considering if it hopes to continue growing as it has in recent years.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.