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(Pocket-lint) - With a rumoured unveiling at E3 this year, speculation about Microsoft's successor to the Xbox 360 is ramping up big time. Sources are now saying that the, for want of a better name, Xbox 720 will even support Blu-ray, even though Microsoft has previously told Pocket-lint in the past that it has no interest in the disc format.

In fact, it was formerly suggested to us by senior Microsoft staff members that the next evolutionary step for a games console would be to distance it from physical media entirely, offering games either by download or cloud streaming exclusively - a business model Apple has adopted for its iDevices successfully.

However, gaming site Kotaku claims that its "games industry sources" say that the new Xbox will switch from regular DVDs to Blu-ray discs in order to make use of the greater storage capacity on offer. And that it will feature Kinect 2, which will come with "an on-board processor, a feature originally intended for the first Kinect".

While we, for the aforementioned reasons, dispute the first claim, the second seems more than feasible. We have heard from our own sources that Microsoft is working on a follow-up to Kinect; one that may even have a shorter throw distance than the current device, in order to cater for European and Japanese homes more effectively.

There is another claim from a different Kotaku "reliable source" that is, perhaps, the most worrying, however. The site states that its contact has informed it that Microsoft is implement a non-used game system, which would not allow you to buy or sell pre-owned titles as they will only work on your specific machine.

How such a system would work is unclear. When you load the game for the first time, perhaps its individual unlock code is then associated with your Xbox Live account permanently. But that seems a bit extreme from a company that expects to battle in the next generation console sector with a potential rival from Sony; the PlayStation 4.

Anyhow, if the Xbox 720 does go down the cloud/download route, preventing the market for pre-owned games is irrelevant. You can't buy or sell a digital copy.

A comment sent to Kotaku also hints that our initial thoughts are correct: "As an innovator we're always thinking about what is next and how we can push the boundaries of technology like we did with Kinect," the spokesperson said. "We believe the key to extending the lifespan of a console is not just about the console hardware, but about the games and entertainment experiences being delivered to consumers. Beyond that we don't comment on rumors or speculation."

Ah, that old chestnut!

What do you think? Will (or should) the next Xbox adopt Blu-ray? Or would you be happy to buy all your content online and store it on a massive HDD or, even, in the cloud? Let us know in the comments below...

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Writing by Rik Henderson.