According to the technology guide Smarthouse, Microsoft and Toshiba may be working on a new Xbox "Entertainment Hub" edition. This new device could possibly add on to the current Xbox 360 specifications with a built-in HD-DVD player, HD TV tuner, and a MP3 player docking port (perhaps using the Zune docking pin setup?).
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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.
The article goes into more detail on the device and suggests that they expect it to be released late 2008 or early 2009.