Microsoft has announced an external HD DVD drive for the Xbox 360, which will launch later this year and allow users to view HD DVD movies on their Xbox 360.

During Bill Gates' Key Note speech at CES it was announced that an external HD DVD is to be released for the Xbox 360. After lots of talk about Windows Vista and Microsoft's support for HD DVD, Bill Gates welcomed Microsoft's vice president of worldwide Xbox marketing Peter Moore to the stage where he announced the HD DVD add-on for the Xbox 360.

"Tonight, I'm proud to announce that later this year we will be launching an Xbox 360 external HD DVD drive. Soon millions of Xbox 360 owners can pop in an HD DVD disk and enjoy high definition movie playback," said Moore.

No price point or release date for the HD DVD drive has been announced, nor has Microsoft released any images of the device or divulged how it will connect up to the Xbox 360.

Immediately following the announcement internet forums exploded with people's views on the add-on, with most apparently claiming this to be the end of the Xbox 360, feeling that Microsoft are effectively creating more consumer confusion. However, one thing to note is that the HD DVD drive will only be used for HD DVD movie playback, as Microsoft has previously said that games would never be released on a HD disc format.

If the add-on can be released cheaply and still keep the total cost of the Xbox 360 below £350 ($500) then there is no reason why the device won't be a success. A price point at or below that of first generation HD DVD standalone players would give consumers the option of HD movie playback and all the functionality of an Xbox 360. By releasing an external drive Microsoft has also been able to keep the cost of the Xbox 360 as low as possible. Comparisons to Sega's ill-fated MegaCD and 32X add-ons seem rather unfair, with this drive merely providing an option to watch HD DVD movies; it isn't splitting the game playing user base of the console like add-ons in the past have.