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The PS3 Blu-Ray drive can still read DVD's?  What about Blu-Ray Movies?  The laser diode in the drive actual has 2 laser outputs, a red laser and a blue.  The red laser is used to read DVD's & CD's, while the blue reads games & Blu-Ray movies.  Most likely the blue laser is damaged as it is much more sensitive to heat.  The solution is replace the laser $@!'y in the drive.  Be sure to get the correct assembly, you can identify the drive by its model number inscribed on the laser & motor is mounted on.

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