True, true...but with Live Arcade, they get to try out the demo first, without having to get their hands on a demo disk. For many reasons, I think MS is right on the mark with Live.
And in an interview BillG, said that the next gen optical disk might be the last one. With broadband and streaming technology, we will depend less and less on physical optical storage as a mean of distribution. In some way, he may be on to something, but we have yet see books totally phased out...if we're using his argument. IMO, Hollywood studios should really embrace broadband as a mean of distribution instead of fighting it, because with the right infrastructure, they can manage/control copies and lower the cost of distrubution (especially when used in conjunction with P2P).
Now, I can see Live that's providing the same common interface for gamers today, will provide the same interface to movie watchers tomorrow. Imagine, having the ability to download movies right into your 360 (using P2P). Now having the ability to watch DRM content, will require you to get a key from the server (Live), and you will be billed on your Live account. Of course, with our current infrastructure it's a little expensive all this for the average consumer. However, having prep the leading edge consumers to the new business model, it will be an easier transition when that time comes.
MS have already started pushing their IPTV technologies. Now, all they need to do consolidate all their strategies into one nice package (X360 with the ability to do IPTV). By no means, this stuff could compete with BR/HD media as it is now.
In Japan, the network infrastructure is more established than in the US, so 360 with the ability to do IPTV, Live Arcade and a simple way for people to chat without powering up their computers (and hopefully in the future -- video chat) will definitely appeal the Japanese. Damn, I'm drooling here.