Intel and Microsoft have agreed to back Toshiba's HD-DVD as the next-generation DVD standard. The companies had waited to extend this backing while Toshiba wrangled with Sony in an attempt to combine HD-DVD with Sony's Blu-ray, a competing next-generation DVD contender. But after those talks fell apart, Intel and Microsoft elected to support HD-DVD, which they feel has a better chance of replacing DVD in the market.

Backing HD-DVD doesn't mean that Intel and Microsoft won’t incorporate Blu-ray into future products. But the companies are sending a strong message to Sony and other Blu-ray backers that they feel that HD-DVD is the superior and more viable technology. The reason is that HD-DVD discs can be produced more cheaply and quickly, leading to lower prices for consumers. HD-DVD also supports a hybrid disc format that includes High Definition (HD) video on one side and standard definition on the other, which is perfect for backward-compatibility.

"We were neutral for a long time," said Jordi Ribas, the director of technical strategy for the Windows Digital Media Division at Microsoft. "But we're approaching the time when this has to come to market, and from our standpoint, the earlier the better."

The HD-DVD and Blu-ray battle is reminiscent of earlier format skirmishes in the consumer electronics market--the most famous, of course, being the VHS versus Betamax battles of the early 1980s. But this particular fight is coming at a tough time: In the wake of dwindling movie theater revenues, movie companies have been making most of their money in DVD movie sales. If consumers can’t settle on a single next-generation DVD format, sales will suffer until a clear winner emerges.

Already, confusion reigns. Some movie studios support HD-DVD, whereas others support Blu-ray. PC makers and consumer electronics giants, likewise, are split in their support of the formats.