The war is on for the successor of the dvd, with film companies and electronics brands taking sides over two possible formats

In the race to create the successor to the DVD, hostilities in the latest format war in the world of home entertainment have been cranked up a notch.

Giants of the music, movie and computer industries are lined up on opposing sides of this battle of the Goliaths with hundreds of millions of dollars in additional revenues the potential prize for the winners.

The DVD Forum, the industry body that oversaw the original DVD format, has proposed the HD DVD format, while the Blu Ray Disc Association is pushing its own format.

Blu Ray (so-named because it uses a blue laser rather than the red one used to read DVDs) is backed by most of the major consumer electronics brands and other big players such as Sony, Apple, Panasonic, Philips, Samsung and Warner Brothers.

Toshiba, NEC, Intel and Microsoft are some of the heavy hitters behind HD DVD. Both formats offer broadly similar capabilities, although Blu Ray has a higher capacity (up to 30GBytes on a single disc) and the players are more expensive.

In the last 12 months it increasingly looked as if Blu Ray was going to prevail. Blu Ray film titles were strongly outselling HD DVD offerings, while a number of major retailers in the US adopted a Blu Ray-only policy.

However, last month Hollywood studio Paramount put the cat amongst the pigeons by announcing it would exclusively support HD DVD instead of the dual-format policy it had adopted to date.

Given that Paramount is currently riding the crest of a wave and will now release major films such as Harry Potter, Shrek the Third, Transformers and Blades of Glory exclusively on HD DVD, the current format war is becoming even more entrenched.

Paramount cited the lower cost to consumers of HD DVD as one of the main reasons for its move, but the deal to exclusively support the format is only for 18 months. Pointedly, Steven Speilberg's movies will appear on both formats.

"For the studios the important criteria for backing one or other of the standards are capacity, copyright protection technology, cost of manufacturing, image quality, sound quality, compatibility with existing DVDs and interactivity," says Paul O'Donovan, an analyst with Gartner.

Paramount executives claim HD DVD is cheaper to manufacture using existing production techniques and has superior support for online connectivity.

The later is important because of "transactional offerings" that Paramount and other studios have planned, such as enabling viewers to click on an item in a movie and be brought straight to a website where it can be purchased.

Paramaount and its Dreamworks subsidiary, which also announced a plan to drop its dual-format strategy, reportedly received $150 million (€110 million) in sweetners to back HD DVD.

The payment will take the form of cash and promotional support from members of the DVD Forum.

Analysts are now suggesting that the approach adopted by the studios and electronics manufacturers is actually damaging the market and hampering consumer adoption.

In a recent report on the global media and entertainment industry, analysts from PricewaterhouseCoopers said that "relatively few stand-alone players have been purchased, which suggests that the presence of two incompatible . . . standards could be inhibiting the market".

O'Donovan and fellow Gartner analyst Hiroyuki Shimizu went even further in a recent research note for clients.

"While there are two competing next-generation DVD formats, consumers will remain confused, causing delay in mass-market adoption," they said.

Gartner does not now expect next generation DVD players and recorders to reach mass-market volumes before 2008 at the earliest.

Entertainment providers and manufacturers of devices have always strategically backed different formats.

The first format war broke out in the 1880s when Thomas Edison was pushing his tin cylinder records and Berliner tried to get market traction with their disk records - essentially the format of records that dominated music delivery for over 80 years.

More recently, in the 1960s there was the battle between the eight-track cartridge and the compact cassette, with the later winning out thanks to its flexibility.

The ultimate celebrity death match was between the competing home video standards - VHS and Betamax. This one rumbled along through most of the 1980s with video stores forced to stock both formats until 1988 when Sony licensed VHS technology from JVC.

But if, as analysts are saying, the fight over competing standards is harming sales, why are the two sides continuing to fight it out? Clearly the stakes are high and the prize for the winning consortium, who will have a head start in selling next generation devices, is huge.

Market research firm Parks Associates said that including stand-alone players and and game consoles, more than 32 million Blu-ray and HD DVD players will be sold in the US by 2011, up from the 4.9 million units expected to be sold this year.

Of course, there is the distinct possibility that there won't be an outright winner in the race to be the next generation DVD format of choice.

Unlike, say, the difference between Betamax and VHS video recorders, both versions of the high capacity DVDs look physically identical and can fit in the same player. A number of manufacturers, including Samsung and LG are now offering high definition players capable of playing both formats.

This would not be the first time that such a compromise has been reached.

Columbia Records 12-inch LP records which played at 33rpm initially competed with RCA Victor's seven-inch/45rpm extended play (EP) records, but ultimately all record players were designed to play both.

The main issue preventing hybrid players becoming commonplace is that royalties would have to be paid to both camps, driving the price of these players above those that only support a single standard. Sony, Philips and the other companies that developed the CD standard made hundreds of millions of dollars from that invention, in addition to the revenues they generated from sales of their own CD products.

"Legal agreements, intellectual property issues and technological pride will likely keep the two camps backing incompatible next-generation technologies from coming together in the near future," say analysts.

As well as that, Japanese executives, and the global consumer electronics business is still dominated by the Japanese, are highly political and have called the idea of merging both formats or producing hybrid players "stupid" on more than one occasion.

Although neither side is for backing down, all observers agree that a bitter format war will only delay the adoption of high definition DVD by consumers who don't want to end up with the Betamax format of the 21st century.

Of course, regardless of who wins the current battle, the manufacturers will simply lick their wounds and ready themselves for the next round of hostilities.

The next generation of optical disc will use two lasers rather than one according to backers of the holographic versatile disc (HVD) which will have an incredible 200GByte capacity.

Invariably a competing standard will emerge and the great and the good of the electronics and entertainment worlds will once again line up on opposing sides of the debate.

As the American philosopher George Santayana put it, "Those who forget the past are condemned to repeat it."

• Format wars have been raging since the 1880s.

• Edison's tin-cylinder records (pictured below) battled against the Berliner's flat disk record (pictured right) that eventually became the format of records that dominated the market for over 80 years.

• Throughout the 1980s, the war between Betamax (pictured bottom) and VHS raged on until Sony licensed VHS technology from JVC in 1988.