Well I don't know if we need to put Blu-ray in there—you'll be able to get Blu-ray drives as accessories.
So looks like we may get another HD-DVD type of accessory maybe?
He goes onto say that the future of HD is a digital delivery model:
I think, probably, the future of movies is on demand, actually, as opposed distribution on physical media
That's probably true, but I don't think that's going to be mainstream for a while. I've done digital delivery of HD movies and I'll stick with my Blu-ray for the titles that I want. The image and sound quality is better on physical media.
You can see the full video here (the relevant bits start around the 00:30 mark):
Ballmer Talks Natal, Says Blu-ray Add-On for Xbox Coming
Looks like that's not going to happen. Major Nelson has posted a statement saying,
...we have no plans to introduce a Blu-Ray drive for the Xbox 360.
Well I guess that clears that up. Apparently Ballmer was referring to PCs. Funny, sounded like Ballmer was speaking of a future where I could get such an accessory, yet I can get a Blu-Ray drive for my PC right now.
Sounds like someone got their messages mixed.
We have no plans for Blu-Ray on Xbox 360