Paramount Pictures and DreamWorks Animation have dropped support for Sony’s Blu-ray next generation DVD format in a shock move that will see the two studios exclusively use Toshiba’s rival HD-DVD system.

Paramount, which is owned by Viacom, the media giant, previously released movies in both Blu-ray and HD-DVD. Significantly, it cited HD-DVD's cheaper costs as a decisive factor behind its decision to back it.

The latest development is a blow for Sony, which has invested heavily in Blu-ray. The battle between Blu-ray and HD-DVD is widely being seen as a re-run of that in the 1970s and 1980s between Sony’s Betamax video format and VHS - a cheaper rival - a fight that Sony lost.

The move is also likely to prolong the confusion among consumers, who cannot be sure of buying a next-generation DVD system that does not become defunct after being beaten by an incompatible rival.

Analysts have consistently suggested that confusion over the formats is likely to seriously stymie demand for both Blu-ray and HD-DVD until a clear winner emerges.

Blu-ray still leads HD-DVD in terms of Hollywood support, having won the exclusive backing of five studios: Sony, Walt Disney, Twentieth Century Fox, Lions Gate Entertainment and MGM.

By contrast, before today only Universal had opted to back HD-DVD exclusively. Paramount and Warner Bros had been making films available on both formats.

However, Sony last month took another hit when it emerged that Europe’s competition watchdog had launched a fresh probe into allegations of possible market rigging in the formats war, thought to centre on exclusivity deals linked to the Blu-ray format.

The European Commission sent requests for information to “several major Hollywood studios” in the second half of June. It is searching for any hints that talks between the studios and the groups behind the formats have given rise to arrangements that could be obstacles to free competition and illegal under European law.

Today’s announcement affects the upcoming DVD release of the blockbuster Shrek the Third and all movies distributed by Paramount Pictures, DreamWorks Pictures, Paramount Vantage, Nickelodeon Movies and MTV Films, as well as movies from DreamWorks Animation, which are distributed exclusively by Paramount Home Entertainment.

Brad Grey, chairman and chief executive of Paramount Pictures, said: “Part of our vision is to aggressively extend our movies beyond the theatre and deliver the quality and features that appeal to our audience.”

He added: “I believe HD-DVD is not only the affordable high-quality choice for consumers, but also the smart choice for Paramount.”

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