I agree with Mrstickball Microsoft is probably going to bypass Sony altogether, and reach for the final format. Which is basically the holy grail of media. A drive that has massive storage capabilities, is fully backward compatible with all the most recent formats, and fully supports recording.
To do that they are going to want a format that supports upwards of a terabyte of storage, and further more supports recording. There are upwards of half a dozen viable formats that do just that nearing production. That is where Microsoft should go, because that is what the consumer really wants.
They want to be able to download and copy high definition movies to a physical format. They want to fill that format with entire television series. Even if next generations games use only a paltry amount of disc space the space that is free on the disc can be used for game memory storage. Given Microsoft's interest in digital distribution it would also be nothing less then a never ending stream of revenue. They could very well corner the market if they were to do that. After all why go to the store, or even buy movies through sources like amazon. When you can just download all of your movies to one disc or have an entire library on a few discs.
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