Former Microsoft executive J Allard said that when it came to the core functionality of the Xbox 360, HD-DVD distracted his team from its core beliefs as to what the gaming machine should focus on.
"A new format for high-resolution movies was not important to us," Allard told GamesTM in an interview.
Instead, the former chief technology officer for the entertainment and devices division at Microsoft said "leading the charge in online gaming" was where his team concentrated its focus.
"We spent a stupid amount of time on stuff like HD-DVD in response to the competition," Allard said, referring to Sony's decision to ship the PS3 with a Blu-Ray drive. At the time, both HD-DVD and Blu-Ray were fledgling formats, both vying for a foothold in an ecosystem where only one could survive.
Allard believes had Sony focused more on online instead of Blu-Ray, things could have turned out differently. "Online is the ultimate and final format," Allard said, adding it would have been wise for Sony to make a bigger move with the PS3.
"Clearly they struggled with killing the sacred cow of physical media that had served them so well for a half-century," he said.
Ultimately, the HD-DVD format did come to Xbox 360 by way of an external drive, but the conversation around adding it to the machine had a negative effect. Allard called it a "good example of how worrying about the competition can take you off your game."
Earlier this year, we spoke with 3 of Microsoft's Xbox heads about the past, present, and future of the platform.