"Right now it's focused purely on movie playback. Think of the drive as something that lets you play high-definition movies on the Xbox 360." The external drive will function as an alternative to purchasing a separate HD-DVD playback device: "If you want to watch HD-DVD movies and if you own an Xbox 360, there will be no reason for you to go out and buy another player."

Microsoft has considered the benefits of HD-DVD for games, but Moore is confident that the current Xbox 360 system and Xbox Live service are fine for next-gen gaming. "HD-DVD from the gameplay point of view is primarily about media storage as is of course Blu-ray," he said. "Our developers are very comfortable with the [Xbox 360's] storage options--I think they're utilizing Xbox Live very creatively, and the hard drive, we have a very strong attach rate for the hard drive."

Microsoft hasn't announced a price point for the HD-DVD drive or possible system bundles, but Moore made it clear that Microsoft will not create a new Xbox 360 with a built-in HD-DVD drive. "If you actually built a HD-DVD new Xbox 360, that fragments [the installation base] even further. So the idea of having an external peripheral is far better to keep the user base consistent rather than build yet another Xbox 360 that has HD-DVD built in--that means millions of people won't have that."