"Sony Corp.'s battered electronics division may not be ready for another marketplace war, but it's getting one anyway in the form of a duel to control the future of home entertainment.

Microsoft Corp. recently announced it's partnering with Toshiba Corp. to develop High Definition DVD players. Toshiba has thrown its support behind the HD-DVD format, and thus against Blu-Ray, the next-generation DVD format backed by a number of big media companies, including Sony. Even though Microsoft maintains it's not supporting one format over the other, the partnership with Toshiba is seen by many as another shot against Sony.

The immediate impetus for the DVD format war is Hollywood. Major movie studios -- considered by some analysts as the sector that will ultimately decide which format wins -- are split between those planning to release films in HD-DVD and Blu-Ray, and most of their agreements aren't exclusive, meaning they can change their minds and support the other format. Americans spent more than $15-billion (U.S.) on DVDs last year, but sales growth in 2005 has not been as strong, spurring efforts to re-energize the format.

Sony has fought a format war before, and lost. The company's Betamax video format faced off against Victor Co. of Japan Ltd.'s (JVC) VHS in the 1970s. Ten years later, VHS dominated the market, and eventually Sony gave up on Betamax.

This time around, though, there's more than just the movie market at stake. Microsoft's partnership with Toshiba may well have more to do with the $24.5-billion video game market.

Sony and Microsoft, the two biggest players in the video game console market, are positioning their new video game systems as parts of a home entertainment hub rather than just game machines. The Playstation 3 -- Sony's successor to the ultrapopular Playstation 2 -- is due for release next year. Sony hopes to use the PS3 to push Blu-Ray DVD." [more]