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JaggedSac said:
Microsoft's real intention was to create a format war long enough for downloadable content to become the standard. Blu-Ray movies have yet to see a big spike in adoption and with the economy quickly going into the dumps people are less likely to spend money on big ticket items such as a blu-ray player. Downloads are the way of the future since fiber optics are probably going to replace the current infrastructure in the near future. Then it will be just like people said about music..that downloading music will never succeed. We all see how that turned out. Downloading things means it is easier for small developers to release their things and cheaper to release as well since no physical media is involved. There could be massive server farms where people make an account, pay for a movie, the movie is flagged as bought, and you can stream whenever you like.

 I agree with your post, except, I'm not to sure if MS's grand plan was for downloadable content to succeed. I mean, what would they have done if HD-DVD won instead? To me it seems like MS switched to downloadable media for the same reason it switched to HD-DVD in the first place, like you said, as a response to sony and blu-ray.  I guess the standard 20gb HDD and lack of in the arcade support this, considering that 8 games worth of offline files (save file etc) and the regular 360 files left me with 14gb's as it is (when I had my 360). It looks like either quick fixes or poor foresight to me, seeing as how big files are these days (i.e HD movies are basically double their SD equivalent and then take into account many TV shows are going HD now, which would lead to HD box sets).

I know you mentioned streaming, which is a option, but I'm running 1.5mb ADSL with 25gb so I would run out pretty quickly and I would guess that the average net speed is 512k down here with <10gb downloads (partly because Australia's internet growth plan is a joke and because the average consumer doesn't know a good deal unless it smacks them in the face) so it's not yet viable everywhere (I'm pretty sure we are one of the slowest internet speed countries with broadband though).