Despite Microsoft's John Schappert claiming the firm has no plans for an Xbox 360 Blu-ray drive, a senior Sony executive has said Microsoft is currently holding talks on the matter.

Sony US president Stran Glasgow said his company is discussing the possibility of launching a Blu-ray drive for the Xbox 360 with Bill Gates's firm.

Microsoft had previously backed Toshiba's HD-DVD format, but following its collapse Microsoft now appears to be considering Sony's winning Blu-ray platform.

A report by GamesIndustry stated: "Adding a Blu-ray drive to the Xbox 360 could make Microsoft more competitive with the PS3, it would also add further costs to the console. Microsoft could instead offer a Blu-ray drive as a plug-in peripheral."

Glasgow added he expects the price of Blu-ray players to drop sharply by the end of 2009, though he does not believe they will fall as fast as prices did for DVD players.

The Blu-ray Association, which controls the standard, has yet to license it to Chinese firms, who are predicted to help cut prices globally.