Microsoft is already in talks to adopt Sony's Blu-ray high-def DVD technology for its Xbox 360 console, according to a report in the Financial Times.
The British business newspaper reported that Microsoft was already in discussions with rival Sony to licence Blu-ray for the 360 - putting Microsoft in the unusual position of having to pay a market rival to use its technology.
It also said that there was a possibility that a Blu-ray drive would be incorporated into a new, high-end version of the games machine.
Microsoft denied that it was negotiating with Sony.
When Toshiba bowed out of the high-definition DVD fight with Sony, Microsoft was put on the spot.
The company had backed the wrong horse in the format race, Toshiba's HD DVD technology, over Sony's Blu-ray.
Microsoft, with its Xbox 360 games console competing directly with Sony's PlayStation3 probably made the right commercial decision at the time.
Tech blogger Peter Griffin believes Microsoft's lack of commitment to the format didn't help its cause.
While the PS3 ships with a Blu-ray drive onboard, the Xbox 360 has a standard DVD drive - a plug-in HD DVD unit was the only way to get high-def content out of the console.
Last week, the software giant had no choice but to pull the pin on the drives.
Microsoft - which had already talked of the possibility of supporting Blu-ray if Xbox users asked for it.
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