Rumors first began swirling last week that Toshiba was working in conjunction with Microsoft on the device, that would also include 1080p video playback, wireless networking and other features. The new system was reportedly a response to Sony's success in marketing its PlayStation 3 system as a Blu-ray player rather than a game console in some markets.
A Toshiba spokesman said, "It's got nothing to do with us. But we know Microsoft doesn't want to include the HD DVD drive so as not to limit the user's experience." Toshiba holds copyright ownership on the HD DVD format.
Microsoft currently sells an HD DVD add-on as an upgrade for its Xbox 360 console, which has lowered production costs in comparison to the PlayStation 3 but, according to some critics, also given Blu-ray an edge in the competition between high definition disc formats.