MSFT's XBox Debut

They're calling it the XBox 360 Elite, and the "elite" clearly signifies a higher price point and more storage for downloading games and storage-hogging high def movies from X-Box Live Marketplace. The storage is so dramatically increased -- twice the size of the 60-gig PlayStation 3 and six times the storage of the existing XBox -- that this is clearly intending to serve eager downloaders, and encourage more people to download the range of content from the marketplace. The new console is paired with an announcement of some new content partners, offering a range of high-def content-- from extreme sports for the teens to National Geographic and A&E for the baby boomers.

The gaming gurus are thrilled that it includes a pricey HDMI cable to connect the device to your fancy high-def TV. But they do have some complaints about what the new console is missing. There's no Built-In wireless, though both the Nintendo Wii and Playstation 3 have it. And there's no HD-DVD drive. You can download and store HD movies from the marketplace, and you can-up-convert regular DVDs to a resolution that's nearly as good as regular DVDs. But to actually pop in an HD-DVD and watch it via the XBox, even on this fancy new version you still have to pay $199 for the external HD-DVD drive.

But perhaps the lack of an HD-DVD player and the bolstered storage is all just commentary on the fact that physical DVDs will likely sink in importance as digital downloads rise. Everyone talks about the "Death of the DVD" -- are we moving towards that? Products like this and Apple's iTV, and sites like BitTorrent and Amazon's UnBox, plus digital downloads from everyone from Wal-Mart to Blockbuster, are making the decision to buy a movie much easier and more impulsive. But they're also pointing to the fact that the DVD's becoming less necessary. But hold your horses. If you want high def, the downloads take an awfully long time, and until compression technology gets better or new broadband pipes are installed, it's going to continue to take a long time.

But there's no question that DVD sales are flattening, and I won't say that the new high-def DVDs are dead on arrival, but I will say that the confusion over the two formats, and the fact that downloads are such a good alternative, does indicate that Wal-Mart's big DVD retail business isn't going anywhere...

For more on the potential death of the DVD, tune into "Fast Money" tonight; I'll be part of the debate.

Questions? Comments?