Sony’s announcement this week that the PlayStation 3 will be getting Netflix’s Instant Queue service, which already lets Netflix subscribers stream thousands of titles for free on their PCs or Xbox 360s, makes Microsoft’s decision to barricade the feature behind a pay wall on the 360 look untenable.

Xbox Live’s gold membership, which lets users play online games and use the Instant Queue, costs between $30 and $50 a year, depending on how much you’re willing to shop around. But with both of these activities soon available for free to users of Sony’s console, Microsoft needs to come up with further enticements to justify the annual fee. (It’s worth mentioning that, unlike 360 users of Netflix streaming, PS3 viewers will need to get a free disc from Netflix to get things working, at least initially.)

Next month’s integration with Last.fm, Facebook and Twitter, as well as the 360’s robust set of online features, do the trick for the relatively connected gamer who already owns both machines. But if I didn’t own any game console and were given a few hundred bucks to spend on just one, my choice just got tougher. When console manufacturers compete on features, gamers win.