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London’s Financial Times has a report today saying that Paramount and its DreamWorks unit are about to dump the struggling HD-DVD format.

According to the report, there was an out-clause in the $150 million deal signed with Toshiba in 2007 – where for a cash payment, Paramount and DreamWorks would only support HD-DVD format until February 2009. Toshiba is the leading backer of HD-DVD.

Apparently the clause stipulated that if Warner Brothers chose to go Blu-Ray exclusively, then Paramount could back out of its deal with Toshiba.

Over the weekend, Warner did just that, triggering the exclusivity opt-out clause for Paramount and the resulting flurry of phone calls to and among lawyers Monday morning.

By backing out, Paramount may simply opt to return to its previous support of both Blu-Ray and HD-DVD formats of high definition video discs. But the newspaper says that may not be the case.

In the Financial Times report, the paper quotes sources familiar with the Paramount-Toshiba deal and went on to further say that the studio is poised to drop HD-DVD and switch camps entirely, joining Warner Bros., Disney, 20th Century Fox, Columbia-TriStar, MGM and Lions Gate as Blu-Ray only producers.

It also would leave Universal as the only major Hollywood studio still supporting HD-DVD exclusively, a scenario that likely would not last long.

Many consumers with HDTVs are not buying any type of DVD high-definition or otherwise until this format war is over. End-of-year figures show sales of standard-format DVDs were down in 2007, a first for the entertainment industry.

As Brian Caufield reports in Forbes, quoting Robin Harris, an analyst with the Data Mobility Group:

Warner’s move signals the studios are tiring of pitting the competing consumer electronics manufacturers against one another. “Hollywood is now done with this particular argument,” Harris says. “They are worried about movie sales and they don’t want consumers hesitating about high-definition content.”

The question here is: will the expected Paramount move finally end this format war?

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