Is this serious thread or a joke thread? Of course they are using Blu-Ray.

The victory of the blue ray was arranged and it was a small one, as it still isnt more popular than the DVD.

With that said, i see little choice for Microsoft, unless they make their own proprietary discs.

It probably will and it should. Anyone who's been to a store that sells movies in the last year or so can tell you that Blu-ray is alive and well.

Of course MS wants a set-top game box to rule the living room. But, just about everyone wrongly credits Sony owing the Blu-Ray disc format as a trove of tech companies over 19 companies (Blu-Ray disc association) created the format together. Sony may get some money for royalty fees but, not the sole company... It would be no different than if Sony's PS4 uses DX11 (MS Owned), or when Sony Laptops/tablets run a windows based operating system they need to pay royalties to MS.

This happens all the time.

most likely since mircrosoft for the past couple years as been turning the 360 into a multimedia center (hell i read a interview that they don't call it the 360 a game console anymore) and i imagine there is going to be a even bigger focus on that then ever before

That's what Netflix/Hulu are for.

true i wonder how many people watch movies on those over dvd's and blu ray 

HD-DVD was not a MS product. That was Toshiba.
And Sony pays royalties to MS for using BluRay, because it uses one of MS patents. MS did not and will not lose anything.

judging by the shelves stocked with them at every retail store and all the listings I see on ebay I think lots.

The Wii uses a Blu-ray driver but locked due the proprietaty format but the hardware is a default blu-ray driver.

The Nintendo just created this format to lock the blu-ray driver for movies, etc.