“The initial shipments of Xbox 360 will be based on today’s DVD format,” said Gates. “We are looking at whether future versions of Xbox 360 will incorporate an additional capability of an HD-DVD player or something else.”

The ’something else’ is unlikely to be Blu-Ray as Microsoft has recently strengthened its ties with Toshiba who back the HD-DVD format.

The extra capacity of an HD-DVD drive would probably only be used for movie playback and not for games, as any releases on HD-DVD would not play on older machines.

The cynics amongst us feel that Gates’ comment may be a public way of backing Toshiba (and hence attacking Sony) without actually committing to HD-DVD.

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