360 HD DVD add-on now $130

When Warner Bros. announced it was backing Blu-ray exclusively last month, it dealt a severe, possibly fatal blow to HD DVD. (Warning: link contains adult language.) Despite Toshiba's deep discounting of HD DVD players and a heavily promoted, unevenly fulfilled 5-free-HD DVD promotion, the biggest distributor of home video in the US had signed on to support the Sony-backed format. That left just two movie studios, Universal and Paramount, backing HD DVD along with Microsoft.

It was widely rumored that Microsoft would unveil a HD DVD-drive-equipped Xbox 360 at this year's Consumer Electronics Show. However, when the machine failed to materialize during Bill Gates' keynote speech, many took somewhat ambivalent comments by Xbox marketing manager Albert Penello as softening support for the format.

But while Microsoft quickly reiterated its support for HD DVD, the company has now made a move which sends mixed messages about its backing of the format. Today, Microsoft announced that the HD DVD add-on for the 360 will cost only $129.99, at steep $50 across-the-board drop from its previous $179.99 price point. The move comes two months after several retailers already dropped the add-on to $129.99 unilaterally.

Is Microsoft's move a sign of further support for the format? Or does it betray a desire to clear off its stock of the peripheral before Universal and Paramount's HD DVD deals expire? According to Microsoft, it is most definitely the former.

"This move is based on continuing the success of HD DVD in the market and responding to consumer demand as experienced during the fourth quarter and Toshiba's recent price moves which increased their player sales significantly," a rep for the company told GameSpot. "Clearly pricing is the most critical determinant in a consumer's purchasing decision and we're simply responding to the market. Also, given the production efficiencies inherent in the HD DVD format, we're able to suggest more cost-effective pricing, especially as sales volumes increase."

UPDATE: Microsoft has also dropped the price of its 360 HD DVD add-on in Australia. Formerly A$249.95 ($223), the HD DVD add-on will now retail for A$129.95.