Division over next-generation DVDs deepening

By Gina Keating

LOS ANGELES (Reuters) - Hollywood studios are becoming deeply divided over which high-definition technology will replace the DVD, increasing prospects that it will be years before next-generation players become standard equipment in U.S. households.

Paramount Pictures (VIAb.N: Quote, Profile, Research, Stock Buzz) and DreamWorks Animation SKG Inc (DWA.N: Quote, Profile, Research, Stock Buzz) signed exclusivity deals to distribute their next-generation discs on Toshiba Corp's (6502.T: Quote, Profile, Research, Stock Buzz) HD DVD format for the next 18 months, a move that evened a contest where Sony Corp's (6758.T: Quote, Profile, Research, Stock Buzz) Blu-Ray Disc appeared to be pulling ahead.

Paramount expected the lower-priced HD DVD players, which start at $299 compared with $499 for Blu-Ray, to tempt consumers more this holiday season when summer box office blockbusters are released on high-definition DVD.

"We are in a very nascent stage in the world of high definition packaged media," said Kelley Avery, president of Paramount Home Entertainment. "Our approach is taking a look at what will motivate the consumer."

But the Walt Disney Co (DIS.N: Quote, Profile, Research, Stock Buzz), a Blu-Ray supporter, has sent a traveling road show to the top eight U.S. shopping malls to promote Blu-Ray players to those looking to upgrade.

"Our goal with the Disney Magical Blu-Ray Tour is to reach as many people as possible and help educate consumers across all demographics," said Bob Chapek, president of Walt Disney Studios Home Entertainment.

Pali Research analyst Rich Greenfield said Paramount's defection from Blu-Ray "alter(s) the landscape meaningfully, as Paramount is the leading theatrical distributor year-to-date."

Eight of the 15 top-grossing films of the year, including "Shrek the Third," "Transformers" and "Harry Potter and the Order of the Phoenix" were released by studios that distribute exclusively on HD DVD or on both formats.