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It also means that in one area, they're a step ahead of Sony. Given that they didn't specify a generation of games, I assume that everything but the Gamecube games (which still need the discs) will be free. That means that while you still have to pay for PS1 games, N64 games are completely free. We're talking two of the best Zelda games.

Automatically assuming that because they didn't specify what generation means they're going to release everything is a bit much. At the end of day, if Nintendo can release only some of their back catalog for free and then charge for the rest then they're going to do it. For the Zelda games especially since they know people will be willing to pay a small fee for those.

The needing discs part isn't really a limitation these days with broadband. Downloading 700MB over 512kbps DSL will take just over 3 hours which is bearable if you leave it overnight. A large portion of most game discs is the FMV anyway which you could probably shrink down a bit for the download version.

All 3 next gen consoles are all very hush hush still so a lot of information is still speculation or leaked which no doubt will turn out to be false or partially incorrect. Relying on actual information released by the companies themselves isn't particularly reliable either. If you believed the hype and various touted features then the PS2 and Xbox would have replaced nearly everything in your AV system along with your (super)computer.

It's the same with the technology demos they keep giving. It looks amazing at the time but when the console finally does get released you'll find it suspiciously lacking. They're able to make such a fancy demo because they don't need to bother with gameplay or anything else.