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Blu-ray Xbox rumors return - May 4, 2008

The rumor that won't die is back, and it still wouldn't seem to make a lot of sense. The English-language web site DigiTimes, which based in Taipei, on Friday quoted a report in the Chinese-language Economic Daily News that Taiwanese OEM Pegatron Technology has secured a contract from Microsoft to assemble a new Xbox 360 model with a built-in Blu-ray Disc drive. The report said shipments are expected to begin in the third quarter.

It's not the first time we've heard rumors of a Blu-ray-enabled Xbox. The last time around the story was that Microsoft and Sony were in discussions about a Blu-ray add-on for the Xbox to replace the HD DVD add-on Microsoft was selling until Toshiba pulled the plug on that format.

As Media Wonk argued at the time, there wasn't any good strategic reason then for Microsoft to add a Blu-ray drive to the Xbox, whether outboard or in-board. And I don't know that the case has gotten any better since.

A Blu-ray drive, particularly an internal one, would add significantly to the cost of an Xbox at a time when both Sony and Microsoft are likely preparing significant fourth-quarter price costs for the PlayStation 3 and Xbox 360, respectively.

Moreover, the Blu-ray drive on an Xbox would be useless for games at this point. Any developer publishing on Blu-ray would automatically cut itself off from the millions of Xbox consoles already in use that do not have Blu-ray drives. Adding an internal Blu-ray drive would also mean adding support for BD-Java and BD+, two technologies Microsoft has never been keen to embrace.

There is some anecdotal data to suggest that the Blu-ray drive in the PS3 is driving some sales of the Sony console, which could conceivably put competitive pressure on Microsoft to get with the Blu-ray program. But adding a Blur-ray drive to the Xbox would only reinforce the association between game consoles and Blu-ray technology, forcing Microsoft to compete on Sony's preferred ground.

But the main reason the rumor sounds fishy to Media Wonk is that even hardware makers who are already in the Blu-ray business, and have supported the format from the beginning, can't get their hands on the components they need right now to build stand-alone Blu-ray players. That's in no small part the result of growing sales of PS3 consoles, which are absorbing the available components for hardware that may or may not ever be used to playback a Blu-ray movie.

Sales of set-top Blu-ray players have plunged in the first three months of 2008, even as sales of PS3 players have grown. Non-Sony Blu-ray makers acknowledge for the record that they have been hit by supply problems, undercutting sales, so it's a fair bet that those supply problems are pretty severe indeed.

It's hard to believe that Microsoft--of all people--would be able to source the components it needs right now to start assembling Blu-ray drives when long-time supporters of the format seem unable to.
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