I don't get what the benefits of Blu-Ray would be for the next Xbox console. Why have a format in which the HD movies on it would compete with Microsoft and Netflix's own offerings on Xbox Live?

As for encouraging people to buy the console as a Blu-Ray player the chances are such people would end up costing Microsoft money. It's the reason they charged people for a remote for the original Xbox console. It's also likely the reason why the PS3's attachment rate is lower than both the Wii and 360 even though those two systems have piracy. Also by that time Blu-Ray players will be so cheap that it won't be an issue.

They should just go with the most economical disc format since it's likely that all games will be installed on the hard drive in the next console anyways.

this is an interesting topic, and i have to agree with the folk that say HD-DVD or some modified version of this tech. Isn't this what Nintendo did with the wii (modified dvd)

I dont see why they wouldnt use Blu Ray, technology is not owned by Sony , and its becoming increasingly popular (Still far behind DVD's) it would make sense. HD DVD is dead and i dont see anyone reviving it even solely for gaming purposes.

I wouldnt be suprised if Nintendo goes back to Cartridges, that are cheap to produce and can give enough space to work with.

I think the Wii has dual layered DVD,not sure tho,but the Gamecube had its own disc format,which what the x720 might do,its really anyones guess.

By the time the next batch of consoles arrives, blu-ray will be much more popular. I see little reason for them not to go. Microsoft will probably opt for blu-ray, and Nintendo will opt for... something else >_>;; Maybe DVD at that point... who knows :P

Blu-ray is going to be overlooked this gen because the technology pretty much started with the PS3, and it's consistently picking up steam :P So we can play that off "for now" as a non-factor, but I'll be curious to see how it plays out later this generation.

Microsoft will NOT go digital download only. That would seal they're coffin at the start of the generation. And while I think HD-DVD is a reasonable answer, it's just a dead format :x Blu-ray will be the popular choice for physical media IMHO.

If the next xbox comes out within 4 years, it will have a Blu-ray drive for its optical media. HD DVD topped out at 30 gigs, with a theoretical max of 51 gigs, read transfer speeds at roughly the same speed as a 2x Blu-ray drive. A HD Drive or proprietary drive based upon HD DVD specifications would cost substantially more than a Blu-ray drive. Also, the HD DVD version would be far behind Blu-ray in both transfer rates and data storage. I don't think MS would put the next Xbox at such a disadvantage and increase its productions costs just to prove a point to Sony.

The other option is to include a modified DVD that has increased storage potential, but transfer speeds drop significantly with additional layers.

Yeah, I'm pretty sure... I know they did something similar with the GC at the very least.

I think MS will go their own route one way or another (but what that route is, is debatable of course).  But like I said, it won't be a last second decision.. chances are they've already begun to debate it right now... which means it is almost certainly not going to be Blu-ray.

I just remembered reading this a while ago:
http://www.cdrinfo.com/sections/news/Details.aspx?NewsId=16457
It's another way for MS to go.

It'll be Blu-Ray or HD-DVD, depending on which one is cheaper.

I also expect an enormous hard drive to come standard, with the option to get any game digitally.

Definitely... by the time the next gen comes around, a 500-gb HDD would cost nothing... I just bought an external 500-gb for $65.00 about a month ago.