Microsoft has announced it will not develop a Blu-ray add-on for the Xbox360. It plans to concentrate instead on digital downloads.

Recently Microsoft had sold a high definition DVD add-on box and there were rumors of a Blu-ray version to follow.

There were also stories in the media about the development of a possible Blu-ray compliant Xbox being developed.

Aaron Greenberg, group product manager for Xbox 360, said in an interview with Reuters "Xbox is not currently in talks with Sony or the Blu-ray Association to integrate Blu-ray into the Xbox experience".

Industry figures have revealed that Microsoft's Xbox 360 has been outsold over the last two months by Sony's PS3.

However Mr Greenberg blamed the lack of stock and promised increased production, saying "by April, we will be in a very healthy inventory situation".

Increased sales of the console are expected in time for when Take-Two Interactive Software's "Grand Theft Auto IV" hits the shelves on April 29th.

It is the first in the series of games that has been available for the Microsoft console and is widely expected to be the biggest game of the year.