Xbox 360: Who Needs Blu-ray?

If there has been any doubt, Microsoft (Nasdaq: MSFT) has reminded us that there will be no Blu-ray drive for the Xbox 360. While the decisions was initially led by thoughts to keep the cost low, the company now says that it will be passing on the format and keep its online path in its focus.

We have been arguing for quite a while that current game consoles are much more different than they have been in the past, and if you do some research, you will find that each console has its own advantages, a very different direction, and a very different idea of how the future will look like.

In a recent interview, Microsoft said that it has no intentions to upgrade the Xbox 360 with Blu-ray or any other optical format. Instead, it continues to pursue the path from DVD to 1080p digital downloads as it believes that Blu-ray is going to be passed by as a format. Sony (NYSE: SNE), however, is betting big on Blu-ray and Blu-ray 3-D as a unique selling point, which, conceivably, needs to carry Sony's argument that the PS3 is the game console that offers superior graphics.

Given Microsoft's solid position on this topic, after the rather memorable brief excursion in the HD DVD field, it will be interesting to see how Sony will be pitching the Blu-ray-supporting PS3 with 3-D capability (PS3D) this Christmas season. It is, by far, the most expensive console in the market, especially if you add the new PS Move controller system. The game console industry is surely in a ditch as far as sales are concerned. My bet would be that Sony has an opportunity to surpass Nintendo in shipments at least in the early holiday season, but the Xbox 360 may be a different kind of animal once Kinect is out.

How much value does Move have? How much can 3-D add? Is there any value left in Blu-ray? These are three premium features that can be marketed, but it appears that the market is shifting in all three segments. We already knew that Apple will not adopt Blu-ray, and we know that Netflix (Nasdaq: NFLX) isn't going this route either as it isn't even offering a DVD/Blu-ray service in Canada, and it is reportedly considering a halt on its mailing service in the U.S. as well. Move has been received very well among the PS3 community, but analysts still believe that it is too expensive and will prevent many gamers from upgrading. Kinect seems to be the more natural evolution to Nintendo's Wii concept, and if Kinect works as Microsoft promises, Microsoft has a shot at positioning the Xbox 360/Kinect as an upgrade to the Nintendo Wii.

3-D is largely a speculative topic right now. Personally, I believe the technology is too expensive to be adopted this year. $2500 for a TV and $150 for a pair of glasses? No, thanks. Next year, it may be too old already as we are seeing reports of 3-D technologies that will not require any glasses at all. If you buy a TV this year and if you are on a budget, think about a decent LED app-enabled TV and wait for 3-D TVs to surface and drop in price within three or four years. But then, I may be all wrong, consumers may feel comfortable again spending their money this year. We will find out this Christmas season how much value there is in 3-D, Blu-ray and in each game console.

Sony's pendulum can swing either way. But it almost appears as if Blu-ray may not be such a powerful proposition anymore, and Blu-ray 3-D may be dead out of the gate, given the cautious approach of film studios.

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