Things are getting ugly in the video format wars.

Today, the two camps in the high-definition DVD battlefield — Blu-ray and HD DVD — lobbed large rocks through each other’s picture windows. For its part, Sony, maker of the Blu-ray format and part of the consortium pushing it, signed a contract with Target, the mass-merchandising store. A story by Reuters says the contract calls for Target to carry only Blu-ray high-definition DVD players through the Christmas holiday shopping season, which should seriously hurt sales of players of the HD DVD format.

Within hours of Sony’s move, Microsoft announced that it’s slashing prices for the Toshiba-created HD DVD player offered as an add-on to Xbox 360 game consoles; as of Aug. 1, Microsoft will sell it for $179 (U.S.), down from $199. Between Aug. 1 and Sept. 30, Microsoft will also toss in five free HD DVD movies, chosen by customers from a list of 15 titles, among them Apollo 13, Seabiscuit, Constantine, Casablanca, We Were Soldiers, U-571 and Blazing Saddles.

But Sony’s announcement was soon tarnished; it had apparently fudged the details of its deal with Target. The deal isn’t quite as exclusive as it sounded.

Ken Graffeo of HD Strategic Marketing for Universal Studios Home Entertainment, issued his own statement today: “Target will continue to carry the Xbox 360 HD DVD drive as well as HD DVD titles so we don’t see much of a change in their plans to carry both formats.”

Target stores, he added, “continue to sell Toshiba HD DVD players on their website. Sony appears to have bought an end cap, just as HD DVD has in retail stores such as Best Buy and Circuit City.”

So from the HD DVD camp’s perspective, Sony’s just blowing smoke. But the HD DVD boosters can’t ignore another retailing coup for Sony: a few months ago video rental company Blockbuster said it would be favouring Blu-ray movies in 250 stores because its customers were choosing Blu-ray titles more than 70 per cent of the time.

And the pro-Blu-ray camp’s spirits were also raised by a report from high-tech market analysts at Texas-based Parks Associates, who — also today — released their opinion that Blu-ray is winning.

In its paper Next Generation DVD Players: Will History Repeat?, Parks analyst Chris Roden said that “consumer confusion” is prevalent, with less than 10 per cent of U.S. consumers stating that they are familiar with the HD DVD or Blu-ray formats. 

Roden did not specify how so much consumer confusion can translate into a victory for Blu-ray, but he continued to say he is seeing the pendulum swing slowly that way, partly because of Sony’s decision to include the Blu-ray player in its PlayStation 3 gaming console.

“Recent retail developments, support from major Hollywood studios, and inclusion of the format in the PlayStation 3 [put] the Blu-ray format in the lead."  

Does this mean the end of the war is night?

Not by a long shot.

Sales of Sony’s PlayStation 3 have been slumping recently, forcing exective reshuffling at Sony's HQ, and there have been some major defections from the Blu-ray ranks — Samsung announced it would make players that play both HD formats, as did Korean electronics maker LG.

All this suggests Blu-ray’s fortunes are resting more heavily on manufacturers other than Sony in the Blu-ray consortium.

For its part, Microsoft decided to separate the HD DVD player from the Xbox, meaning it’s reaching for a larger market segment to carry the HD DVD product.

In terms of content, Sony owns two major Hollywood studios — Columbia and MGM — and has support from Disney, Lionsgate, and 20th Century Fox. On the other side, Universal Studios and the Weinstein Company are backing HD-DVD, and they have their own list of attractive movie titles. The remaining studios (Paramount Pictures, DreamWorks, Warner Bros. and New Line Cinema) are playing it safe, offering their movies in both formats until a winner emerges.

This all suggests the fate of the two will be the format that is chosen by the studios that make the most popular movies.

That’s too simple — there is one major factor being largely ignored here. In falling into the inevitable trap of comparing the Blu-ray vs. HD DVD conflict to the one in the 1970s and 1980s, in which Sony’s Betamax format lost a bitter fight to VHS, analysts tend to ignore the digital revolution that has taken place since.

Two decades ago, it was a simple matter of how many people would buy one or the other kind of videotape player.

Today, however, the real decision is not only at the mercy of movie moguls, but might be decided by PC manufacturers, who will be choosing which DVD drives go in their multimedia machines. There are a lot of them, and their ranks are supported by Microsoft and Intel.

And those guys are digging in for the long haul.

This is going to be a long war.