Microsoft, according to insiders at Toshiba owner of the HD DVD patents, claim that Microsoft is working on a brand new Xbox that will incorporate not only a new HD DVD drive but a large hard drive and new entertainment software that is a spin off from its struggling media centre offering.
The device is being developed in response to the PS3 driving sales of games software and Blu-ray content in several countries. A recent Sony Brand Wave study conducted in five countries including the UK, Australia, France Germany and Spain revealed that a key reason that consumers are buying a PS3 is because it includes a Blu-ray player.
Recent GFK research reveals that the recently launched Xbox 360 HD DVD attach player is not selling well. Another factor that impacted early sales of the Xbox 360 was that Microsoft failed to include a HDMI port - omitted because Microsoft wanted to cut down the costs of the console in an effort to compete up against the PS3.
The new Xbox device, while allowing for extensive gaming capability, will be positioned as an entertainment hub that includes gaming and extensive wireless networking capability as well as 1080p playback. There is also talk of it including a dual HD TV tuner and EPG capability and a docking port for an MP3 player. For Toshiba, the device is critical if it is to be successful in beating Sony and the Blu-ray promoters.
Also being discussed is the development of an open standard docking port similar to the 17 pin iPod port. This would allow all manufacturers to use the same port for docking.
A senior Toshiba executive in Singapore told SmartHouse that "An Xbox with a built in HD DVD drive is critical. They and we are working on it. It also has to be more than a gaming machine. Microsoft recognise this. A version of the device may also be sold under the Toshiba brand name".
Scott Browning, the Marketing Director of JB HiFi Australia's second largest consumer electronics retailer said, "The device is a lay down mis`ere and essential for the HD DVD camp. We are told that one is coming. The PS3 has been extremely successful for Sony in getting Blu-ray off the ground and for Microsoft, the omission of a built in HD DVD player is set to hurt sales going forward as consumers are aware that the PS3 comes with a Blu-ray player."
Both Toshiba and Microsoft have also explored the possibility of a new open standard chassis system that allows an Xbox to be slotted into a HD TV screen over 40-inch. The open standard bays will allow hard drives to be upgraded and expanded similar to the way that users can upgrade the hard drive on a PC.
Another big problem for Microsoft according to insiders is getting the heat and noise output from the current Xbox 360 under control so that the new device can run silently while a movie is being played. It is known that Toshiba has been working with Microsoft on this issue as it has extensive experience in notebooks and "quiet" drives. Currently most iPods incorporate a Toshiba drive.
Another benefit for Microsoft in moving to a new Xbox platform is that it can introduce new components that are less likely to fail. Currently the PS3 has a failure rate of under two percent. Recently Microsoft was forced to allow for a $1.3 billion charge against warranty claims following reports of up to a 30 percent failure rate of the original Xbox 360.
The new device is expected to be released late in 2008 or at the 2009 CES show in Las Vegas.