...because HD-DVD and BluRay are two different things.  That's like asking why a CD player can't read a DVD.

Unless you're asking that they put in a HD-DVD and a BluRay player which is just silly (especially since we're talking about price).

Squilliam said: I think people forget that Microsoft has also got a piece of the pie for Blu Ray. They get a kickback on every disk sold as the Blu Ray disks are using their codecs!

Uh yeah, they get $3,000 per title, not disc, for the AACS.  Yeah, it's a little bit -shrugs

It won't be that big of a deal.

MS already pays royalties to use DVD techs. That will just shift to Bluray. The licensing will have no major impact on the production costs of the neXtBox.

1. dvd royalties are probably comparable to bluray.
2. bluray drives will be considerably cheaper by 2011, i.e. the expected start of the next gen.

This is really a non-issue.

Squilliam said: I think people forget that Microsoft has also got a piece of the pie for Blu Ray. They get a kickback on every disk sold as the Blu Ray disks are using their codecs!

Yes, but, as in HD-DVD, MS'  codec isn't mandatory, anybody can choose amongst it, MPEG2 and MPEG4. Microsoft would have earned much more from HD-DVD, indirectly, by weakening Sony, and directly because the subsystem for interactive contents most diffused implementation, HDi, was MS' IP and run, iirc, by Windows CE, so HD-DVD meant much more royalties for MS.

If the new Xbox is supposed to provide full-fledged media-center capabilities, they will have to include an optical disc drive, for CD and DVD playback alone (these two won't be gone by 2011). Whether they're also going to include Blu-ray will probably depend on how popular it is around that time. If it remains a niche format, they could as well choose HD DVD and thereby prevent piracy more easily (HD DVD was not made for data storage via burning, that's why no HD DVD burners were ever available). If it's significantly popular by then, they probably have to include it, but if it's popular it will also be cheap, so I don't see any real disadvantage.

Just in, Sony is rumored to be strongly considering using the Cell for the PS4, and if so, they will undoubtedly be able to save in comparison to starting over from scratch with respect to another processor.

Just as MS will probably use a slightly altered version of an IBM PPC chip again, saving in production time and R&D costs.

Really, none of these things will matter one bit in the big picture when the next generation starts. These are fanboy talking points, nothing more.

All microsoft has to do is release a fully backwards compatible console in 2011 that crushes 360/ps3 specs and has a bluray(or whatever media is all the rage). Pass it off as a new console that upgrades 360s capabilities...but doesn't make it obsolete. 360 will still sell, games for it can still be made as the new console supports it...

All demand for ps3 and their 10 year plan is pretty much gone if this happens... By then sony may still be battling 360 for marketshare and all of a sudden the new, best, most powerful console on the market inherits the whole 360 marketshare and then some.

You forget that also reassuring gamers and developers is very important, and this is where Sony did more than MS, reassuring on the lifespan of its platform, while MS still didn't say almost anything, even less granting it. Extending XB360 platform's life won't be of much usefulness if it happens by the time people don't expect it anymore. Up until now MS was quite clear about shorter console life than Sony, if they changed their mind, they must let people know asap and they must not cheat.

I have no clue why the next Xbox needs to have Blu-ray. It could be DVD, HD DVD, an improved version of DVD, carts, direct download, something else, or it could even have more than 1 format (like all of the consoles currently have).

I didn't really see the meaning in your other reasons.