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In their eyes the HD-DVD addon was a failure, plain and simple.  Why would they want to invest in another possible failure when it's not even something they're focused on? 

This isn't as tough as yall are making it out to be.  He was asked about Microsoft and BluRay and he gave three very honest answers why it wasn't going to happen or at least wasn't currently on their list of things to do.

  1. It's not something a lot of 360 owners are looking for or else more would ask for it.  As far as they see it they already have a perfectly fine video service with the movie marketplace and Netflix (and they are right because that is a very good service).
  2. It doesn't help 360 gaming any at all.  It was pretty straightforward and honest that if they allowed 360 BluRay games, then the 28 million shipped 360's out there would not be able to play those games.  That's a very bad thing.
  3. It would raise the price of the console for something that most 360 owners do not want, potentially replace the video service that's already very good and already has a lot work put into it, and something that would not help them further their gaming machine.  So why would they want to put BluRay in the 360?

So yes, very straightforward no spin answer.