Xbox to become DVD player

Microsoft is developing a next-generation Xbox that mixes a traditional game playing design with digital video recorder capabilities, according to the Wall Street Journal.

The project, dubbed "Freon", has not been confirmed by Microsoft. But chief exective Steve Ballmer told a financial analyst briefing in mid-November that the Xbox was part of a "broader concept" and called it "a bigger play we hope to get over time".

Microsoft could pitch the Xbox to software vendors as an all-purpose box: part PC, part video game machine, part set-top box.

The company is thinking of introducing a design-enhanced console either next year or sometime in 2004, the Wall Street journal said.

The date of introduction would break the five-year development and launch cycle established in the sector for new systems, and more significantly precede the launch of Sony's next PlayStation in 2005.

But Microsoft will face direct competition from PC manufacturers if it moves the Xbox in a multimedia direction.