Following HD DVD's demise, there's been a lot speculation that Microsoft would add a Blu-ray option to the XBox 360. The latest rumor has a subsidiary of Asus, Pegatron Technology, making a premium Blu-ray-equipped version of the XBox 360 that will arrive in time for the holidays. This one follows on the heels of a report that Lite-On was going to be the one making the Blu-ray drives for Microsoft's game console.
If you speak Chinese, you can translate the Asus rumor from Economic Daily News, a publication that Gizmodo calls a "Taiwanese rag." While we may not have tremendous faith in the specifics of the rumor, Taiwanese companies aren't known to keep secrets all that well (that's a gross generalization based on a few comments I've heard from industry insiders, but I believe it). And it does seem logical that Microsoft will add a Blu-ray option to help eliminate any perceived advantage that Sony might have with the PS3.
All that said, don't expect Microsoft to put out any games on Blu-ray any time soon. With the current XBox 360 installed base having only a DVD drive to play with, Microsoft would be looking at movie playback, not gaming.
Of course, the rumors could be wrong and Microsoft could simply put out an external Blu-ray drive similar to its discontinued HD DVD drive offering. Or perhaps there will be a premium XBox 360 with Blu-ray, as well as a separate Blu-ray external drive for current owners. Sounds inevitable, right? Comments?