Sony emerged victorious from the next-generation DVD format war on Tuesday after Toshiba said it would stop manufacturing HD-DVD DVD discs and players.

Atsutoshi Nishida, Toshiba president, acknowledged that Warner Brothers’ decision in January to throw its weight behind Sony’s rival Blu-ray format had been the final straw following a string of defeats for HD-DVD.

The two-year battle had initially appeared close, with HD-DVD backed by Microsoft, Paramount and Universal Studios, and Blu-ray supported by Walt Disney, 20th Century Fox and Metro-Goldwyn-Mayer. However, the move by Warner Bros, Hollywood’s largest player in the home video market, handed Blu-ray about 70 per cent of Hollywood output.

The format’s success appeared to increase further after reports last month suggested Paramount would withdraw its support for HD-DVD.

Toshiba was forced to slash prices of its players in the US as defeat loomed and, on Friday, Wal-Mart, the world’s largest retailer, said it would sell only Blu-ray players in its stores, following similar moves by Target, Best Buy and Blockbuster.

Toshiba said it would stop making HD-DVD equipment and stop selling players and recorders from March 31. It has invested millions of dollars in HD-DVD during the past two years and sold about 1m players.

“We carefully assessed the long-term impact of continuing the so-called next-generation format war and concluded that a swift decision will best help the market develop,” said Mr Nishida. “It was a tough decision. But it would have a big impact on our management if we continued [with HD-DVD].”

Sir Howard Stringer, Sony’s chief executive, is understood to have used his strong connections in Hollywood to convince major studios to support Blu-ray.

The victory comes at a crucial time for Sony. Sales of its PlayStation 3 have lagged behind other games consoles and last month the company admitted it would not hit its profit target for the year. Blu-ray’s triumph could give an important boost to PS3 sales, one of the cheapest Blu-ray players on the market.

Sony said on Tuesday: “Overwhelming support from all the relevant industries, including Hollywood studios, consumer electronics and IT companies, retailers and video rental stores is clear proof that consumers have chosen Blu-ray as the next-generation optical disc format.

“We believe a single format will benefit both consumers and the industry.”

Toshiba last night declined to comment on how its withdrawal would affect its earnings. Hiroyuki Masuko, analyst at Nikko Citigroup, said losses stemming from its investment could total about Y50bn ($465m).

The decision ends a war between rival consortiums led by Toshiba and Sony vying to set the standard for high-definition movies on DVDs.

Toshiba said it would begin to reduce shipments of HD DVD players and recorders and aim to end the business by the end of next month.

The Blu-ray win means consumers no longer have to choose between rival incompatible formats and run the risk of being stuck with a 21st century equivalent of Betamax – Sony’s videotape technology that lost out to VHS in the 1980s.

Having one format should also help accelerate the shift to the new technology in the $24bn home DVD market as shoppers faced with rival machines that played only one type of disc or the other, have previously held back.

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