X360 uses a LAST gen format (DVD) for the current high definition generation of games. Not good. We can already see games beginning to cut corners, such as GTAIV being smaller than San Andreas and lacking flight vehicles. Pathetic. I mean, DVD9 is essentially the same as the Wii discs! HD video requires a LOT more space (about 6 times that of SD video). If developers want to make large games, a high storage capacity is necessary. Even Hideo Kojima already said that MGS4 is pushing the boundaries of Blu-ray capacity.
Not to mention, a lot of X360 games such as Gears of War, Kameo and Perfect Dark Zero are disappointingly short, presumably due to low storage capacity of DVD9. And don't say it's not needed just because Oblivion fit on DVD9. That game had notably harsh load times on the X360, which could have been avoided if it was on the Blu-ray Disc.
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