Reports are filtering in that the big wigs at Microsoft have decided to tackle the PS3’s built in Blu-Ray player head on- by incorporating an HD-DVD drive within the 360 itself. This seems to be in line with the rumor OXM ran in their latest issue which said that Microsoft is going to produce an uber-premium SKU sporting a 250GB HDD and *drumroll* an internal HD-DVD player.

And that’s not all. It seems that it will be more than just a player of HD-DVD movies. Reghardware suggest that the internal drive will also have burning capabilities. This is all speculation at the moment, since the information has leaked from Taiwan’s optical disk drive production, but if all goes to plan:

The sources suggest the second-generation Xbox 360 could ship during the first half of 2007. By then, Microsoft’s Zune will be available, backed by a online content shop that’s going to be selling movies pretty darn soon, if not from day one.

So Microsoft plan to release the re-designed 360 before the delayed PS3 hits Europe. This will be yet another blow to Sony’s coffin, along with the bigger HD-DVD discs that are in development, meaning Sony have little over Microsoft now. Also, we know that the Taiwanese support Microsoft’s approach, so this leak is likely to have some backing behind it.

Of course, unless MS offer some sort of trade in for early adopters of the system, you may not want to pay for a 360 with a player built in, instead opting for an external drive. Sadly, you won’t be getting the whole deal:

The external HD-DVD drive, however, can only play back movies, the sources noted.

This makes the external drive seem rather expensive, if it only does half a job compared to the built in drive, and could turn many potential buyers (myself included) away from purchasing the product.

Does this news also mean a bigger HDD is on the way as well? Possibly, if MS’s online store is to offer movies, it will need to be a whole lot bigger, bearing in mind most movies are approximately 4GB, that means you can store three movies, with one Gig left for everything else. Not very helpful for DLC and the like.

The biggest irony to come out of all this is that the external HD-DVD drive is not even going to be released in Asia, despite the production team being from Asia. The pay must be good!

So what do you all think? Personally I hope for Microsoft’s sake they offer a trade in similar to what they did the DS/DS Lite (in the UK, early DS adopters got a fixed fee back on trade-in to put towards the DS Lite), because otherwise there are going to be a lot of people very unhappy, knowing that their system is now out of date, and their alternative of an external drive doesn’t have the same capabilities. This in turn could drive away consumers to rivals. But who knows, the future is certainly an exciting one.

So a new HDD seems to be in the pipeline, and after all the rumours about HDMI, it seems to be included as well. So there you have it folks; are Microsoft going to upset early adoptors? Only time will tell, but don’t forget, this all speculation at this stage.

Many thanks to frontieruk and Studley for the heads up.