Posted by Ian on March 7th, 2008 at 10:43 AM CST

Over the last few weeks, there have been rumors indicating that Microsoft was working on a Blu-ray addon for the Xbox 360. The Financial Times is now reporting that Sony is in talks with Microsoft about adopting Blu-ray. According to the article, Microsoft could incorporate a Blu-ray drive into the Xbox 360 or offer support via an addon, similar to their HD DVD player.

But after Sony’s victory last month in the high-definition DVD format war, Stan Glasgow, Sony Electronics US president, said the two sides were now talking about Microsoft adopting Blu-ray.

A Blu-ray drive in a 360 would make Microsoft more competitive with the PS3, but it would also mean extra revenues for Sony’s electronics division. It would also add further cost to the 360, meaning a premium edition of the console could be necessary.

A Blu-ray drive could be incorporated in its top-of-the-range Elite Xbox, or Microsoft could again offer a drive as a plug-in peripheral.

While I don't see Microsoft incorporting a Blu-ray drive into the Xbox 360, an addon drive is a probably a given at this point. If you'd like to read more, the entire article can be found here.