Since the demise of the HD DVD format there have been rumors that Microsoft, an early backer of HD DVD, would offer Xbox 360 owners a Blu-ray player add-on. While the Blu-ray Xbox 360 rumor runs rampant, Microsoft denies it will offer a Blu-ray option.
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Neil Thompson from Microsoft has says that downloads rather than physical media will be the norm over the coming years and says Microsoft has always said online is the way to go. Microsoft maintains that HD movies will simply be downloaded opening the Xbox 360 up to become a movie rental device similar to the Apple TV device.
"But there was a time gap of us launching and getting to that world. We knew certain of our customers would want a hi-def format and we thought the most cost-efficient way of doing that was going down the hi-def peripheral route."
Via BBC News