http://www.informationweek.com/news/showArticle.jhtml?articleID=205210354

Xbox Becoming Centerpiece Of The Digital Living Room

Think the Xbox is just for games? Think again. Microsoft (NSDQ: MSFT) announced at the Consumer Electronics Show on Sunday that the Xbox 360 is about to become your set top box and one-stop shopping for digital downloads.

During a keynote address on Sunday night, Microsoft chairman Bill Gates and Microsoft entertainment and device division president Robbie Bach announced that British Telecom would soon be offering consumers the choice of using their Xbox 360 as a set-top box for IPTV. Whispers of such a development were heard as early as last July's Financial Analyst Meeting, though details and confirmation were scarce at that time.

Microsoft also said that the Xbox would bolster its position in the digital downloads game, announcing deals with ABC and Disney to distribute high-definition content on the $350 console. That means Hannah Montana fans and people looking to watch the ABC evening shows they missed can watch directly from their Xboxes. MGM, meanwhile, is bringing its library of films to the console. Microsoft first announced digital downloads would come to Xbox in late 2006.

"Xbox Live, when we're done integrating this content, will offer more than twice as many hours of on-demand, high definition content as any cable or satellite provider," Bach said.

In a fierce competition where the PlayStation 3 has gained accolades for its high performance and superior graphics and where Nintendo's Wii has revolutionized the use of gestures for games, Microsoft needed something new to set it apart from the other two. It got that in these announcements, which make the Xbox as much a central part of the digital living room as a gaming device.

Not that the Xbox 360 was suffering too much from a competitive standpoint. Bach announced that Microsoft has shipped 17.7 million Xboxes to date, doing $3.5 billion last year in sales through November. That number constitutes a billion more than the Wii, its closest competitor. The downloads will be distributed through Xbox Live, a service Microsoft says has 10 million users today.

this has been a long time comming. This is the future as we know it, not bluray or hd dvd, but downloads.

Yeah I think Microsoft's definitely on the right track, even though I haven't tried the movies/tv shows on there. I wonder how well they're selling.

I honestly never really cared much about Blu-ray vs HD-DVD because downloads are probably the next big step.

I want my IPTV.

I have long knew this would be brought up, but when I found out I could link my 360 to my PC, I know it was over with. I love being able to watch movies on my PC and with the last update, I can even watch my DIVX movies! I guess that's why I play my 360 more than my Wii and definitely my PC. I can be doing a video game review or blog and just cut a movie on, sit back in the recliner and watch it.

Folks say MS is gonna go Blu. I doubt it. Downloads are where they are heading ...

Well, Sony can do just the same and I believe they just said something about it they will have a press conference about it in 2 months.

Actually the PS3 is even better positioned to be a digital download hub than the 360, since all PS3s have HD (replaceable + USB 2 external drives) and Gibabit ethernet+Wi-Fi (except 20Gb, no wifi).

Also Sony owns 2 movie studios and due to their Blu-ray partnership they probably have good contacts with other studios... so they they will most likely be able to match or even beat MS on content.

But then there are others interested in this market. Apple and Netflix just come to my mind. Microsoft will not have an easy way to win this one...

PS: Also, don't forget the PS3's DVR ability in Europe (forgot how it's called)

 Well that, and Average Joe won't be downloading movies for quite some time to come :( Hell TiVo and DVR hasn't really taken off to any extremes yet, I can immagine what "Downloaud ur mvoies" will be like. Some form of physical media will be around, most likely DVD's, but if they can keep spamming out the HD Tv's, they have a pretty good chance, esp now that were boiling down to one format.

@ Krik,

Correct, but you can do use a $199 Gamestop refurbed 360 to stream movies, videos, music and pics from a PC. If cost is not an issue, then yeah - a PS3 offers Blu Ray, HD storage and the like. If you want to play games and watch movies off your PC for as cheap as possible, head to Gamestop.

Downloads where they may be heading but Downloads is certainly NOT gonna go mainstream...

Downloading mp3 files of music is VERY different to keeping your computer on for hours to download files...not only this but then you need large hard drives, a healthy internet connection....

All these things aren't mainstream..