Blu ray will be grand for the next few years, and nobody will be able to afford this for a long time.

No, I said common with the prosumer. In 5 years time 4k projectors will probably be the spearhead bringing theater-grade resolutions from the world of professionals to the world of cutting-edge hometheater enthusiasts.

That's where the market will move, eventually: once you reach these pro standards with a commercially viable solution you basically can cut the phase of digital transfer that video producers have to go through now. The same raw source data coming from digital video cameras or from high quality film scans used today in theaters will be sold to the final users with minimal dabbling, no need for remastering, resizing, hand-tuned recompression.

As soon as there's a market of tech enthusiasts, a format and support will be needed, and 300-400GB BluRays with some wavelet based codec will be promptly offered as they will be quite common and relatively inexpensive in 5 years.

Holographic Media will probably replace Blu-ray sometime in the future but I doubt that the PS4/Xbox 720 will launch with Holographic drives because the technology will still be too expensive at that point even if the launch is delayed until 2013. The discs might be cheaper sooner then Blu-ray discs but the drives will not be reasonably priced by the time the PS4/Xbox 720 launch Blu-ray dives will almost be as cheap as DVD drives are now by that point.

Still, theres no connection really between the needs of movie developers which are high capacity streaming media and the needs of game developers who require moderate capacity random access media.

Do you doubt that next-gen consoles will rely even more on low-latency buffers? Today it's the HDD, tomorrow it might be solid state or some memristor based memory. But I can't see it going in a different directions than with PCs: installs for the randomly accessed data and code, big sequential media streamed from the optical support.

And big means really big: when CGI will be 1080p as a standard in all RPGs, hi-quality 7.1 audio will be standard, more GPU memory will mean higher def textures, that will mean easily more than 2.5x or 3x the size of today's assets. Apply the multiplier to a game like FFXIII or MGS4 or Rage and 200+GB optical discs will come in handy.

Putting everything on a 200GB flash stick on the other hand might still be way too expensive.

Except the industry if given enough performance from the console itself will continue the trend of moving away from expensive CGI onto pre-rendered or in game cutscenes. The rest -> Textures, models, etc would likely still be random access in the same way it is now.

Yes the assets are getting bigger and compression isn't getting better. If they could compress efficiently now they wouldn't complain about the DVD-9 disc size. However the actual models and terrain themselves can get a nice dose of tessellation, the first gen technology of this will be implemented with direct3d 11, by the time 2011 rolls around we'll have 2nd or 3rd generation tessellation hardware which should simplify the rendering of polygons and the models used to create the game.

I don't see how using 10-20GB flash drives would be any hassle in a couple of years. It will be more expensive than optical drives, but consider the savings of not having to use a mechanical hdd or optical drive and slashing the ram requirements down. Its a saving which could net more than $100 and $5 per game at the start of the generation is a pretty good tradeoff with that level of savings.

We're reasoning about 5 years in the future, right?

- CGI are not going away in 5 years. Next gen consoles won't be powerful enough, as they will probably comparable to PCs of 1-2 years before the launch date. As for the CGI price: moving in-engine the rendering won't make much for the biggest cost, that is the setup of models and scenes and animations. It's not the rendering farm that is expensive, it's the artists designing the stuff. Same man-hours spent setting in-engine scenes instead that in Maya means comparable cost.

- Tessellation basically saves on geometry, and that saves you precious GPU memory. But space on the storage media is hardly taken up by detailed models data. I deem that marginal. On the other hand procedurally generated content will be more and more important for sure for things like terrains in open world games.

- Higher def textures wil simpy require more space. They do on today's PC games.

Completely removing the optical drive doesn't make sense: in 2011-2013 both MS and Sony will still want their console to be a media hub. This media hub must be able to play CDs, DVDs and most probably BluRay movies.

What makes more sense? Using the BluRay disc format for games too and including 200-500GB of solid state storage in the console, or limiting games to half the size of MGS4 or FFXIII on each $5 stick?

If CGI cost just as much as in engine video rendering then it would be more popular, no? It would be an obvious choice, and yet even PS3 exclusive games like MGS4 for example tend to eschew CGI for in engine rendering or pre-recorded rendering from inside the game engine. Even though theres more space available, still the trend remains and it goes against CGI so the only plausible explanation is that it costs more and the price/benifit isn't there unlike the previous generation.

I do grant that textures do take up a lot/most of the space. There isn't an easy way around this unfortunately. However I don't see them exploding to over 20GBs by the next generation alone, thats a lot of unique content to create. Procedural generation is constantly catching up, and perhaps it may alleviate this issue.

As for optical formats, both Microsoft and Nintendo don't seem at all interested in physical media anymore. Furthermore I doubt that many consoles are actually used to play music or movies, people tend to prefer actual dedicated players for these functions and theres always the shift to and focus on digital formats streamed over the internet such as Netflix. Microsoft hasn't put much thought into DVD playback if the quality is any indication.

Lastly, as for space on solid state flash medium 4GB will cost $8 retail, 16GB will cost $30 retail. The actual flash and manufacturing costs are likely half the Newegg prices given there are several layers of margin and shipping between the consumer and producers. Therefore its possible to conclude that the cards cost roughly $1 per GB of data. Given the fact that flash producers like Samsung are currently transitioning to a new process node and another one will be transitioned about the time the next generation consoles are released one could conclude that one could get a 16GB card for roughly $4 manufactured assuming transistor counts double twice. 32GB for twice the cost would be more than enough for almost all ambitious games released towards the start of the generation.

Given the fact that these cards can be made to be only usable on the one console im certain that publishers would be willing to wear some of the additional costs involved in using flash as it would eliminate the used market for games.

Storage tends to find ways to fill itself with content.  It happens over time.  As of this point the 360 is managing ok with its storage, but will be hitting the wall at the end of its run.

- CGI vs in-engine: you missed an important point. In-engine is cheaper as long as it is simpler in effects, models, animations, scope and postprocessing setup. As engines get more complex you can approach the quality of CGI, but you're doing so by putting more and more man hours into setting those in-engine scenes, using real actors for motion capture and developing extra assets and effects.

So in-engine is cheaper than CGI as long as it's not as good, basically :) The day we'll have consoles and GPUs doing real-time raytracing and all the other rendering tricks there will be, obviously, no distinction. Until then, you only go in-engine when it's "good enough". But if you want something special - say, your engine is optimized for small-medium distances but you want an epic birdseye cutscene - you still have to resort to CGI. And that's just a must for strategy games, flight simulators, RPGs, basically anything which engine is not designed around human figures in closeup / full figure / midfield shots, or that requires a great variety of scopes in its cutscenes.

Plus, the proof is in the pudding: the 360 and PS3 are certainly more capable at rendering cutscenes than the Xbox or PS2. Are Lost Odissey, Star Ocean 4 or Final Fantasy XIII (we don't know the exact size yet, but I think you'll agree it will be 1 BR /4+ DVDs) smaller or bigger than the comparably long (in gameplay) SO3, FFX and FFXII?

- MS hasn't put much weight behind DVD playing because by the time the 360 was out everybody had a player yet - and they sold for $39 - and yet they payed the license for DVD and produced an add-on for HD-DVD playing. And when was Nintendo in it for the multimedia anyway?

But in 2011-2013 any media hub - and there will be many - coming out without BluRay playing capability will be second-rate. BluRay playing will have value, but not be entirely common. Not only that, but the consoles will probably be among the best BluRay players out there, because they are much more complex than DVD players: a proper BluRay 2.0 player must have an HDD, must be able to process Java code quickly, must offer network connectivity, must be strong in parallel stream processing.

As for digital distribution, it will make good money for MS, but it can't be the only option for a number of years yet. There's not enough network infrastructure for most customers for which that quality is good enough, and that's not even a given. Either they wait at least another 5 years or they limit their audience to a small fraction of the one they could have by simply including a - by 2011 - $50 optical drive. Plus, where are you supposed to store all the stuff you download if that's the only access option? HDDs are fickle beasts when their size grows enough. My DVDs and BluRays are much safer as a storage medium, and I can lend them to my friends at will.

- The only really safe way for publishers to cut the used game market will be on-demand digital distribution. Flash cards allow some extra tricks by being writeable (I suppose you can write a special sector using the console id as an encryption key, then verify its content vs a public key) but I have little doubt the mechanism will be broken by exploiting one of the exceptional occurences, such as console replacement. That's the future of any hardware on which people can put their hands in :)

Endline: I agree with some of your opinions but not for the near future timeframe. I actually long for the day we'll see a better replacement to optical disks. But they are simply a very cheap way to convey a high density of information.