Since the last breath of HD-DVD rumors have been flying about Microsoft’s need (desire?) to get into the Blu-Ray hardware for their 360. The rumor was feasible because Microsoft already spent time working the HD-DVD angle for their “home entertainment” Xbox 360 console.
Although Microsoft’s Shane Kim told Forbe’s, “I can categorically say that we’re not working on a Blu-Ray player for Xbox 360,” there is further proof in Microsoft’s direction: Netflix. From a profit standpoint, Microsoft’s got more to work with in a downloadable digital format with Netflix than they do sending another specification off to manufacturing.
The effort that went into the HD-DVD addon was significant but with risk comes reward, but risk also comes with the chance of failure. Microsoft had to write it off as a failure, do they really need to go through it all again when digital downloads are the future of media? Probably not.
The Xbox 360 is going to be three years old this year, positioning another addon hardware storage player seems like the wrong idea for many reasons:
- Spend your R&D efforts on the next-generation console, not more fluff addons to compete against Sony.
- Blu-Ray for movies is still risky, considering the cost of movies in the market (and their slight increase when HD-DVD died).
- Global adoption of Blu-Ray is still years off
Undoubtedly, Blu-Ray would be a great storage medium for their next-generation console because it could be established as the core storage platform for developers. If the intent is just to play Blu-Ray movies, you’re going to work hard, today, when adoption rates are so low.
Until you can use a Blu-Ray player for both games and movies, stick with digital downloads of movies and retail purchases for games. Maybe next-generation.
Microsoft recently announced their 
Why release a single block buster game with a two week pop when you can simply lower the price of your console and boost sales by 100%? That’s a question Sony may be asking themselves right now, as Metal Gear Solid 4‘s hype may have lasted years but the sales and console unit sale boots lasted a month.