In an interview with TechFlash.com, Microsoft's president of Entertainment & Devices Division Robbie Bach laid out exactly why.
"It’s not a feature we get a ton of requests for. We really don’t," he stated regarding the tech that is currently found in Xbox 360 rival PS3.
He added, "...From a technical perspective, it doesn’t help us in the core of what Xbox does, which is in gaming." Bach noted that there are 28 million Xbox 360s on the planet that do not have Blu-ray, so Microsoft would be extremely unwise to alienate that crowd with mid-cycle Blu-ray games support.
Lastly, he said Blu-ray "costs a lot of money," a fact that Sony's gaming division can attest to. In all, Bach claimed that Blu-ray is "a little bit of a technology looking for an answer."
As for high-def movie playback, the exec noted Xbox 360's movie download service and streaming Netflix support.
Bach flatly said Blu-ray doesn't fit in with Microsoft's current strategy, commenting rather derisively, "...OK, let me get this straight: I’m going to add something to the product that’s going to raise the cost, which means the price goes up, consumers aren’t asking for it, and by the way, my game developers can’t use it."