But don't worry, it doesn't sound like the company is going download-only just yet.
Microsoft has not yet confirmed its Xbox 720, codename Durango, but that hasn't stopped the industry from talking about it, nor does it mean Microsoft isn't discussing the project behind closed doors. Apparently, one thing Redmond has been whispering about is the fact that the new console won't have a disk drive.
MCV claims to have been told that Microsoft has been telling partners that the newest addition to the Xbox line won't have an optical drive. Though a disk srive is out, it's though the console will offer compatibility "with some sort of interchangeable solid-state card storage," but it's not clear if this means MicroSD or something proprietary. Additionally, MCV reports that a 2013 launch date has been confirmed.
Microsoft's not one to comment on rumors or speculation, and MCV's sources say the briefings were issued under "the strictest NDA" they've ever encountered (so much for that?), so we're not expecting to hear anything substantial from Microsoft regarding this rumor. Indeed, in a statement to MCV, the company said that it's always "thinking about what is next for [its] platform" and ways to "defy the lifecycle convention" but declined to comment beyond that.
The Xbox 360 already enables users to download games, additional content, movies, and music so Microsoft isn't exactly unfamiliar with downloadable content. It's also worth noting that many laptop manufacturers already choosing to ditch the optical drive. The Xbox 360 was first unveiled in 2005, which was quite a few years ago. Assuming Microsoft intends for the Xbox 720 to last at least as long as the Xbox 360, it's not difficult to imagine the Xbox without an optical drive in 2019.
So, now the real question: What kind of 'card storage' would Microsoft go with?

it's the limited bandwidth...
remember...many ISP have 250GB bandwidth limit for BOTH download AND upload...
if you account for all the streaming media a person uses every month on top of all the regular internet traffic AND already available downloaded games, you're going to hit that limit even faster if video game consoles need CONSTANT online connections for their games...
They should add and SSD or have a HDD but allow for your own upgrades. The feature on the Xbox to save an entire game on the hard drive is amazing. Saving some games (not all) at your discretion with a SSD would dramatically reduce load times. A SSD will also improve overall system performance.
making that a more expensive solution than discs. $100 for games? nah, I'm sure they are just going to use some sort of SSD for the system storage and move to download only.
As for the disk drive (or lack thereof) in the console itself is understandable. Will it support blue ray disks, and older 360 games? More likely then not. Wait, what?!
It seems that no one here remembers that the XB360 had a little known USB attachment - the HD-DVD drive. It worked great, and mine still works ^^ although they dont make those disks anymore.
If that thing has USB ports.... (and it will) you would just plug in your USB optical drive (dvd, blueray, whatever) to it, and do what you need to do
it's the limited bandwidth...
remember...many ISP have 250GB bandwidth limit for BOTH download AND upload...
if you account for all the streaming media a person uses every month on top of all the regular internet traffic AND already available downloaded games, you're going to hit that limit even faster if video game consoles need CONSTANT online connections for their games...
This is almost exactly how I use my PC steam account....works a treat for me.
Card storage might be really some type of authorization key card, allowing us to access a cloud system that lets us stream game content via their servers. Much like steam or even onlive. Internet is getting faster and faster...but more importantly we need companies to push the ISPs to allow us to have this type of content.
If I guess correctly and Microsoft is pushing for this type of delivery method it will inadvertently/purposely start a infrastructure revolution in the US.
OHHH Google would hate that.
They should add and SSD or have a HDD but allow for your own upgrades. The feature on the Xbox to save an entire game on the hard drive is amazing. Saving some games (not all) at your discretion with a SSD would dramatically reduce load times. A SSD will also improve overall system performance. Saving games on your HDD should be and Option, a games on DISCs and DISC Drive should be required.