Xbox One's hard drive can't be removed, but USB port supports extra storage

The hard drive inside Microsoft's newly revealed Xbox One game console includes 500 GB of storage space, which is certainly a lot more than what's currently available for the Xbox 360, but Microsoft has designed the Xbox One so that its hard drive is inaccessible to most of its owners.

According to an Engadget story, Albert Penello, Microsoft's senior director of product planning, confirmed that Xbox One owners will not be able to remove, replace or upgrade the console's hard drive on their own. No specific reason was given for this decision. While the first Xbox console had a non-removable storage drive, both the original Xbox 360 and the current Xbox 360 S had proprietary hard drives that could be quickly removed and replaced by their users.

Good news for heavy gamers and those want to download and store a bunch of movies on the Xbox One, however: Penello confirmed the console's USB 3.0 port will allow external hard drives to be connected and that those drives are allowed to store all of the data types that the internal hard drive supports, including Xbox One game installs and downloads.

Source: Engadget | Image via Microsoft

Report a problem with article
Previous Story

Microsoft isn't talking yet about its plans for used games on Xbox One

Next Story

Xbox One Anthem video features Bill Gates, J.J. Abrams and more

91 Comments

Commenting is disabled on this article.

A 500gb hard drive is small in comparison with the size of blu-ray. In theory, a 500gb harddisk could hold only 20 games.
The use of usb 3.0 is nice however, MS is not quite explicit about it, is it possible to install the game in a usb 3.0 harddisk?, or the usb 3.0 is only for store other stuff?. And, let's say that i can install a game in a external harddisk, is it possible to "share" this hard disk?.

Also, about the harddisk, is it possible to run a game without insert any disk?.

Actually, they were. Yes, you can install Xbox One games on external HDD.

Didn't see about running without a disc, but I would think if they are doing this in general, they would make it so you don't have to load the disc.

The first xbox's hdd can be removed. but you need to install something on the new hdd to trick the battery into thinking is the same size as the battery original being told!

I wonder if a CF chip in an IDE converter would be enough. Reminds me of old 286's with MFM had to have a load on the power supply. That's funny.

Wow. All the dumb *uc* negativity here. Over the hard drive. Lol. Hilarious. I think it's amazing reading what looks like a bunch of children's playground arguments. Get over it you geeks! NEWSFLASH: 98% of gamers are purposely the opposite of you lot and couldn't give a **** that the hard drive isn't removable. Microsoft have no reason to listen to a tiny minority over their core demographic. Such tiny minds here.

Anyone who read the wired exclusive will kow that the hard drive is custom built anyway, so you wouldn't be able to upgrade it to a higher volume, you'd only be able to replace it with other xbox one hard drives!


A new 500-GB hard drive was designed in-house, likewise a custom-built Blu-ray-capable optical drive. A single 40-nanometer chip contains both the CPU and GPU rather than the two dedicated 90-nm chips needed in the 360. In fact, a custom SOC (system on a chip) module made by AMD contains the CPU/GPU chip, the memory, the controller logic, the DRAM, and the audio processors, and connects directly to the heat sink via a phase-change interface material.

And we all know that opening up the console and upgrading the hard drive won't work either. Even the original Xbox couldn't just have its hard drive swapped out without modding the console.

Guess they've made these new hdds defect free and will last the entire life of the console? The more I learn about the future of gaming, the less I want to be a part of it.

I see that it will not play current 360 games. Does this also mean my xbl arcade games are also worthless should I decide to upgrade and get rid of my 360?

AR556 said,
Guess they've made these new hdds defect free and will last the entire life of the console?

Although I do agree with what you're saying, in reality there are several other parts in the console that are not user-serviceable either and have just as good odds of breaking down. They don't make the optical drive removable for example, and we all know those can fail.

Tha Bloo Monkee said,

Although I do agree with what you're saying, in reality there are several other parts in the console that are not user-serviceable either and have just as good odds of breaking down. They don't make the optical drive removable for example, and we all know those can fail.

Good point, the soldered down RAM is more likely to fry than an HDD break down and that's not removable- likewise with the BD reader.

Tha Bloo Monkee said,

Although I do agree with what you're saying, in reality there are several other parts in the console that are not user-serviceable either and have just as good odds of breaking down. They don't make the optical drive removable for example, and we all know those can fail.

yeah, I know, but this is just one more hassle to deal with. Why should the user have to send off their system just because of an hdd failure? There really isn't a legitimate reason for not allowing the user to slide in any old off the shelf laptop hdd. Hell, they don't even want you to open up the system to blow the dust out! These decisions are based on nothing but control.

Edited by AR556, May 22 2013, 11:30pm :

I believe that is to fight piracy. Since games will be Hard Drive enabled. Making the hard drive removable would have given easier access to hacker to grab the info they're seeking.

Err you seem to have something a bit wrong 'Xbox One owners will not be able to remove, replace or upgrade the console's hard drive on their own.', no, they won't be able to do ANYTHING with the hard drive, it'll be locked by some encryption or some ID to that console and that console ONLY. Dead hard drive = buy a new console.

n_K said,
Dead hard drive = buy a new console.
That's a truly horrific thought. We all know platter hard drives never fail. /s

ozzy76 said,
That's a truly horrific thought. We all know platter hard drives never fail. /s

And we've not yet seen inside the device nor know how hot the internals run, hard drive lifespan is greatly reduced the hotter it runs. So yes, actually, it is pretty important.

TCLN Ryster said,
Before anybody starts freaking, lets just be clear that what n_K posted is pure speculation

Why would it be speculation?
Xbox 1 - Hard drive was locked and the code was stored on a chip on the motherboard.
Xbox 360 - Hard drive is encrypted and has special header checks in place with a copyrighted image.
Xbox One - All games are going to be stored on the hard drive, and you can bet they want to keep it locked down, so how would they do that without encryption and say if you could readily modify the hard drive contents, hummm?

n_K said,

Why would it be speculation?
Xbox 1 - Hard drive was locked and the code was stored on a chip on the motherboard.
Xbox 360 - Hard drive is encrypted and has special header checks in place with a copyrighted image.
Xbox One - All games are going to be stored on the hard drive, and you can bet they want to keep it locked down, so how would they do that without encryption and say if you could readily modify the hard drive contents, hummm?

You can store content like games on the external USB3 HDD as well it seems. That would indicate that when you first connect the new drive it will ask you to format and encrypt it etc. The same could be the case with the internal, I don't see why you can't send it in and have them replace just the HDD even for a small fee if it's out of warranty and not pay for a whole new console.

n_K said,

Why would it be speculation?
Xbox 1 - Hard drive was locked and the code was stored on a chip on the motherboard.
Xbox 360 - Hard drive is encrypted and has special header checks in place with a copyrighted image.
Xbox One - All games are going to be stored on the hard drive, and you can bet they want to keep it locked down, so how would they do that without encryption and say if you could readily modify the hard drive contents, hummm?

Exactly what GL007 said... If you are going to be able to use a USB 3.0 hdd then why would it be any different to the internal HDD? Care to explain?

ingramator said,

Exactly what GL007 said... If you are going to be able to use a USB 3.0 hdd then why would it be any different to the internal HDD? Care to explain?

Because the internal hard drive will most probably store the OS or parts of it.
No OS = no console.

n_K said,

Because the internal hard drive will most probably store the OS or parts of it.
No OS = no console.

It doesn't have to, it's not going to take up as much space as full Windows does on your PC. No reason it can't be on a ROM, which also makes it more secure and harder to crack.

Shadowzz said,
really, a ROM. and how are they going to update the OS then?
ReadOnlyMemory...

Oh, I dunno, how about they flash it like you flash your BIOS maybe? You know, EEPROM. If you want to be so specific it could just as well be a set of onboard NAND that's also encrypted.

GP007 said,

Oh, I dunno, how about they flash it like you flash your BIOS maybe? You know, EEPROM. If you want to be so specific it could just as well be a set of onboard NAND that's also encrypted.


Flash was used on the 360 because it didn't have an internal hard drive.
Mass production uses things that are as cheap as possible, why pay extra for flash memory and the flash memory controllers when you can just use the hard drive? Answer: Chances are they won't.

n_K said,

Flash was used on the 360 because it didn't have an internal hard drive.
Mass production uses things that are as cheap as possible, why pay extra for flash memory and the flash memory controllers when you can just use the hard drive? Answer: Chances are they won't.

Added security? The HDD is a less secure piece of hardware in the end. You can take it out and attach it to a PC and then go to work on it like they did with the 360s HDD. Since the 360 didn't hold the OS on the hard drive and could work without it why couldn't the XB1 be the same?

At this point we don't have enough details so we're both just making guesses on what we think it'll be till we know for sure.

I am really surprised the Xbox One does not have a Solid State Drive. SSDs have no mechanical parts that can fail, so it would help future proof the Xbox! However SSDs are still very expensive, but maybe future consoles will have them when they are less expensive!

Edited by Atomic Wanderer Chicken, May 22 2013, 12:36am :

Knowing too many people with failed SSDs, I'll take the spinning platter again this time around. SSD drives do not in any way protect you against failure.

I wouldn't be surprised if it has like 8-16GB of flash onboard to store the OS for fast booting.

The problem with doing all flash storage is that it would have basically doubled the price of the console to provide ~500gb.

TCLN Ryster said,

And mechanical drives do?

Mechanical failure rates can be combated by taking proper care of hardware and protecting it from falls and other forms of sudden impact.

SSD, though my favorite form of storage right now, will fail just through regular use. Reading and writing cause wear and tear on SSDs in ways that simply aren't a factor with mechanical drives.

You're talking out your ass. Every single SSD I've ever owned and installed is still going strong, the oldest at 92%. I've never known a single person to lose one, but know plenty including myself that have lost many a mechanical. BTW all the SSDs are for the OS and 24/7 use.

Hahaiah said,
You're talking out your ass. Every single SSD I've ever owned and installed is still going strong, the oldest at 92%. I've never known a single person to lose one, but know plenty including myself that have lost many a mechanical. BTW all the SSDs are for the OS and 24/7 use.

Oh no! You've defeated facts with your anecdotal evidence!

Hahaiah said,
You're talking out your ass. Every single SSD I've ever owned and installed is still going strong, the oldest at 92%. I've never known a single person to lose one, but know plenty including myself that have lost many a mechanical. BTW all the SSDs are for the OS and 24/7 use.

I have had an SSD that was DOA. And I have another one that is currently in the process of failing after 6 months use (and that's only 8 hours per day usage). I've only had one mechanical drive to ever fail, I believe.

So while you've had another experience, don't assume that your experience proves anything, just like my experience doesn't prove anything.

As for the SSD vs mechanical, with mechanical drives there really isn't any higher failure rate, and you get more size for a cheaper price with the mechanical drives.

SSDs are more resilient to shock and movement but HDDs aren't prone to static wear down among 50 million other problems they have at the moment. That and if you wanted a 500GB SSD you'd be forking out more than the console itself...

Better than paying crazy high prices for a special 'Xbox hard drive upgrade'.

This will have the same effect as the old system but will be cheaper for most people since they can just buy a normal external hard drive.

Stetson said,
Better than paying crazy high prices for a special 'Xbox hard drive upgrade'.

This will have the same effect as the old system but will be cheaper for most people since they can just buy a normal external hard drive.

If they aren't going force you to buy expensive proprietary accessories then what would have been the harm of implementing the HDD the same way as the PS3 with a small external cover that lets you swap it out with any off the shelf 2.5" SATA drive?

That is good I would rather buy an external HDD that I want to use rather than go with a 1st-party accessory that would be more expensive.

Makes sense when you think about it, have one set of specs an stick to them.

Rather than have 160gb/250gb/320gb bundles, or even the prospect of it not having a drive at all. There is always a standard amount of storage available in total.

If you need more you can add more, thanks to USB3.0 speeds and cheap HDD prices

Of course, we get it... Everything makes sense when you're an MS fanboi.

The good thing is, PS4 it is without second thought. For the smart guys, anyway.

Why Xbox One the name? Because they know every time Xbox is ONE step behind.

PC EliTiST said,
Of course, we get it... Everything makes sense when you're an MS fanboi.

The good thing is, PS4 it is without second thought. For the smart guys, anyway.

Why Xbox One the name? Because they know every time Xbox is ONE step behind.

Wow that is one of the stupidest Sony fanboy comments I've read.

PC EliTiST said,
Of course, we get it... Everything makes sense when you're an MS fanboi.

The good thing is, PS4 it is without second thought. For the smart guys, anyway.

Why Xbox One the name? Because they know every time Xbox is ONE step behind.


As long as you have warranty, you can just have the HDD replaced by Microsoft, and if you're out of warranty you can break the console open as much as you want without losing anything.

I really don't see why you'd need to have an easy way to replace the internal HDD, unless you're not tech savvy enough; in which case you shouldn't be replacing the HDD yourself anyways.

kurupy said,
Makes sense when you think about it, have one set of specs an stick to them.

Rather than have 160gb/250gb/320gb bundles, or even the prospect of it not having a drive at all. There is always a standard amount of storage available in total.

If you need more you can add more, thanks to USB3.0 speeds and cheap HDD prices

Different HDD sizes causes absolutely ZERO problems or even requires consideration at all from developers. All they need to do is set a minimum size needed to fit everything, which is obviously way below 500GB. Just make it only a LITTLE difficult to access like Sony does with a screw and include an HDD with every system. No problem can ever arise from this.

500GB is more than enough, no need for it to be removable,

The last time I removed my drive from my 360 was to upgrade it to a higher capacity,

However, in saying that Games On Demand etc will prob be 20-50GB each which means only only around 10-20 games could be installed at a time (Assuming they keep install to drive option)

brent3000 said,
500GB is more than enough, no need for it to be removable,

The last time I removed my drive from my 360 was to upgrade it to a higher capacity,

However, in saying that Games On Demand etc will prob be 20-50GB each which means only only around 10-20 games could be installed at a time (Assuming they keep install to drive option)

That's a poor argument. Just because 500GB is enough for you doesn't mean it is for everyone. There are 2TB 2.5" drives available now. With PS3 (and hopefully PS4) the drive is hidden behind a panel and lets you use any off the shelf 2.5" SATA drive. The system will kindly format it for you, too.

mrp04 said,

That's a poor argument. Just because 500GB is enough for you doesn't mean it is for everyone. There are 2TB 2.5" drives available now.


With all the requirements on the drive and the ability to jack a USB3 drive into the system, there is no need for any extra, depending if the USB port is limited to all hell, 500gb should be enough for a console with any movies and music using the high speed USB3 option

Torolol said,

yeah, a few decades ago, Bill Gates said 640 KB is enough ....

Gets your facts straight, Bill never said that its an online thing only,

mrp04 said,

That's a poor argument. Just because 500GB is enough for you doesn't mean it is for everyone. There are 2TB 2.5" drives available now. With PS3 (and hopefully PS4) the drive is hidden behind a panel and lets you use any off the shelf 2.5" SATA drive. The system will kindly format it for you, too.

Right and if its not enough for the MINORITY of people then you can darn well plug in a USB 3.0 hdd I don't see the friggin problem mate. That and MS may release an "elite" console that has say 2TB of storage in it- we just don't know. You can't expect people to fork out an extra $100 to put in a bloody 2TB 2.5" drive that will appease like 1% of people.

brent3000 said,

With all the requirements on the drive and the ability to jack a USB3 drive into the system, there is no need for any extra, depending if the USB port is limited to all hell, 500gb should be enough for a console with any movies and music using the high speed USB3 option

What? How does that mean that the hard drive shouldn't be replaceable? I'm not saying do it like the Xbox360 because extra considerations have to be taken to make the drive that easy to replace. But look at the PS3. It's not meant to be changed often. But you CAN change it if you want and the PS3 will format the new drive you put in and let you use it. It requires a hard drive in the system, but that hard drive can be any 2.5" SATA hard drive.

500GB may be enough for many people but the OPTION to change the hard drive yourself would be nice. I personally would rather not have an external drive tethered to the xbox. If I buy an XB1 and it is possible to change the internal drive using some homebrew tools I very well may. It'd be nicer if they just put it behind a flap and let the system format it for me though.

ingramator said,

Right and if its not enough for the MINORITY of people then you can darn well plug in a USB 3.0 hdd I don't see the friggin problem mate. That and MS may release an "elite" console that has say 2TB of storage in it- we just don't know. You can't expect people to fork out an extra $100 to put in a bloody 2TB 2.5" drive that will appease like 1% of people.

I'm not expecting many people to do such a thing. But it wouldn't hurt to make the drive externally accessible. It doesn't even need to be encased in anything. Look how the PS3 handles hard drives. It is ideal.

mrp04 said,

What? How does that mean that the hard drive shouldn't be replaceable? I'm not saying do it like the Xbox360 because extra considerations have to be taken to make the drive that easy to replace. But look at the PS3. It's not meant to be changed often. But you CAN change it if you want and the PS3 will format the new drive you put in and let you use it. It requires a hard drive in the system, but that hard drive can be any 2.5" SATA hard drive.


Remember, we don't know what the drive actually does yet, for all we know it could house a portion of the OS on it, so changing it would break the overall running of the unit it self.
It that's the case then its understandable for MS to want to lock it down, but it can also contoll the quality of the drives running the Xbox unit...
Loading a cheaper drive into this might not run very well with the snappy OS it required...

Untill the teardown hard to pinpoint but locking it away tells me they don't want any quality to be substituted..

warwagon said,
When the hard drive dies? After the warranty is over?

There have been and will continue to be ways to pay for a replacement, even out of warranty. Out of warranty doesn't mean your only option is to buy a new console.

Joshie said,

There have been and will continue to be ways to pay for a replacement, even out of warranty. Out of warranty doesn't mean your only option is to buy a new console.

Yeah cause everyone wants to pay $150 to send the box to Microsoft to replace it with another measly 500GB drive. Playstation handles this correctly. Drive is hidden under a panel with a screw accessible externally. You can swap the drive with any standard 2.5" SATA drive and have the system format it for you.

IDK why people are defending this decision. It was silly and only in Microsoft's interest, not the consumer.

mrp04 said,

Yeah cause everyone wants to pay $150 to send the box to Microsoft to replace it with another measly 500GB drive. Playstation handles this correctly. Drive is hidden under a panel with a screw accessible externally. You can swap the drive with any standard 2.5" SATA drive and have the system format it for you.

IDK why people are defending this decision. It was silly and only in Microsoft's interest, not the consumer.

You do realise that 0.1% of PS3 users would ever swap the HDD right? If they have a problem they send it back to the manufacturer. I dare say people that can wield a few screwdrivers will be able to replace the XB1's HDD as well.

ingramator said,

You do realise that 0.1% of PS3 users would ever swap the HDD right? If they have a problem they send it back to the manufacturer. I dare say people that can wield a few screwdrivers will be able to replace the XB1's HDD as well.

Microsoft has confirmed that there is system software on the XB1 HDD. Whether its locked to the console has not been confirmed. I find it unlikely that the XB1 has the capability to format the drive and download the OS from the internet to recover if the drive has been replaced at home. IF it is not locked to the xbox then I'm sure someone will make a tool to do it, but if its locked then you can probably forget about it.

Good. There's no reason why it needs to be removed/replaced. 500GB is plenty, as is.
Like someone mentioned, you can hook up an external, so perfect.

LUTZIFER said,
Good. There's no reason why it needs to be removed/replaced.

Besides the whole, if it goes bad out of warranty thing.

xendrome said,

Besides the whole, if it goes bad out of warranty thing.

If the console develops a fault out of warranty, there's be no warranty to void by taking it apart to replace the drive yourself.

"will not be able to remove, replace or upgrade the console's hard drive on their own. "

That likely just means it's not user swappable, not that it'll be impossible to swap by taking the console apart.

xendrome said,

Besides the whole, if it goes bad out of warranty thing.


Encouraging users to open up the console and swap out hardware leads to a far higher device failure rate than just leaving it alone and relying on external expansion devices.

thatguyandrew1992 said,
Bad idea. Others might want to swap it out. You wouldnt have to, if you didnt want to.

Having a model where users can swap out the drive means the warranty has to support it an Microsoft has to cover damages caused by clumsy owners.

TCLN Ryster said,

If the console develops a fault out of warranty, there's be no warranty to void by taking it apart to replace the drive yourself.

"will not be able to remove, replace or upgrade the console's hard drive on their own. "

That likely just means it's not user swappable, not that it'll be impossible to swap by taking the console apart.

What makes you think you will be able to swap the drive? The original Xbox was bound to its drive and the drive bound to the Xbox it was installed in. The only way to replace the original Xbox's hard drive was to mod the Xbox to obtain the HDD password. When applied to another HDD and that drive formatted in the same way and all the OEM files copied onto it using special tools would it work. They could implement a system like this or even more secure on the Xbox One.

Joshie said,

Encouraging users to open up the console and swap out hardware leads to a far higher device failure rate than just leaving it alone and relying on external expansion devices.

Uhh. Yeah. That's why you don't encourage them to open it up by having it hidden behind a panel accessible externally. Like the Xbox 360 S or PS3.

LUTZIFER said,
Good. There's no reason why it needs to be removed/replaced. 500GB is plenty, as is.
Like someone mentioned, you can hook up an external, so perfect.

Honestly, you guys say 500GB is plenty now, but give it some time and I'm certain that it won't be enough for everyone. Especially with the new generation of games, where 20gb+ will be standard for one game.
At least external hard drives work.
However, I wouldn't be surprised to see future revisions of the console be bumped up to 750gb or 1TB.

Raa said,
With USB 3.0 ports, probably not that big deal now anyway.

Exactly why they have, uhh, 3 of them? I think there's 2 on the back and one on the side. And if it supports externals up to 3TB then no real issue (probably supports higher hdd sizes as well).

Mordkanin said,

Seriously. USB 3 is faster than the optical drive.


What does the optical drive have to do with this? Games are installed to the hard drive and run without the disc. Installing all of your games and making use of the other aspects of the device, 500 GB might be limiting.

Memnochxx said,

What does the optical drive have to do with this? Games are installed to the hard drive and run without the disc. Installing all of your games and making use of the other aspects of the device, 500 GB might be limiting.

Then buy an external USB 3 HDD as the article states...

"the console's USB 3.0 port will allow external hard drives to be connected and that those drives are allowed to store all of the data types that the internal hard drive supports, including Xbox One game installs and downloads."

SATA 3.0 = 6 Gbit/s (up to 600 MB/s)
USB 3.0 = 5 Gbit/s (up to 400 MB/s)

(Source: http://en.wikipedia.org/wiki/S...Comparison_with_other_buses)

The bottleneck is rarely with the interface speed anyway, it's the physical reading and writing speed of the actual hdd in question. Only SSDs come close to saturating SATA3. Mechanical drives are no-where near. This image is from a benchmarking tool I saw posted on a forum to illustrate the point.

http://img194.imageshack.us/img194/1681/hvlqr6nl.png

Edited by Ryster, May 22 2013, 1:09am :

TCLN Ryster said,

Then buy an external USB 3 HDD as the article states...

"the console's USB 3.0 port will allow external hard drives to be connected and that those drives are allowed to store all of the data types that the internal hard drive supports, including Xbox One game installs and downloads."

SATA 3.0 = 6 Gbit/s (up to 600 MB/s)
USB 3.0 = 5 Gbit/s (up to 400 MB/s)

(Source: http://en.wikipedia.org/wiki/S...Comparison_with_other_buses)

The bottleneck is rarely with the interface speed anyway, it's the physical reading and writing speed of the actual hdd in question. Only SSDs come close to saturating SATA3. Mechanical drives are no-where near. This image is from a benchmarking tool I saw posted on a forum to illustrate the point.

http://img194.imageshack.us/img194/1681/hvlqr6nl.png

That's true, but USB is only as fast as SATA if it implements USB Attached SCSI (UAS) and the external drive is both USB 3.0 and supports UAS. Otherwise random accesses and concurrent read/writes will KILL the speed.

mrp04 said,

That's true, but USB is only as fast as SATA if it implements USB Attached SCSI (UAS) and the external drive is both USB 3.0 and supports UAS. Otherwise random accesses and concurrent read/writes will KILL the speed.

Another person that knows what they are talking about. However lets face it, the bottle neck will be the actual read/write speeds of the disc so this really is a non-issue.

So basically all you need to know is does the Xbox One support UAS. After that it's down to how much the user wants to spend.

JTaylor69 said,
I can see many not in favour of this

Well it is certainly not ideal. Say that I got 20 games, and since all of them must be 'installed' (now, that's a bit lame), then how much space would I have left for other stuff?

I reckon that if they support external disks this will partially solve the problem.

mrp04 said,

That's true, but USB is only as fast as SATA if it implements USB Attached SCSI (UAS) and the external drive is both USB 3.0 and supports UAS. Otherwise random accesses and concurrent read/writes will KILL the speed.


Depends on how the data is stored on the external drive. If it contains a ******** of small files, then yes, the speed will be horrible. If the games are stored in large container formats, this doesn't need to be as much of a problem. A 2.5" drive of mine does, connected over USB 2.0 25MB/s with large file transfers (about 70-90MB/s over eSATA), however, this is only with sustained data transfers with continuous writing/reading. With smaller files the speed drops significantly, indeed.
However, since MS does allow this now, I'm fairly sure they've found a way to mitigate this problem, particularly because they are very much aimed at (perceived) speed for the consumer.

Jorik Modderkolk said,

Depends on how the data is stored on the external drive. If it contains a ******** of small files, then yes, the speed will be horrible. If the games are stored in large container formats, this doesn't need to be as much of a problem. A 2.5" drive of mine does, connected over USB 2.0 25MB/s with large file transfers (about 70-90MB/s over eSATA), however, this is only with sustained data transfers with continuous writing/reading. With smaller files the speed drops significantly, indeed.
However, since MS does allow this now, I'm fairly sure they've found a way to mitigate this problem, particularly because they are very much aimed at (perceived) speed for the consumer.

It doesn't matter if the game is stored in a container file or if it's stored normally. That won't affect speed other than when you're copying one continuous file from one place to another. The game is going to randomly access the data whether its in a container or not.