A report in the New York Times, quoting two executives close to the deal, said that the payment includes a bonus of $150m in a combination of cash and promotional guarantees for films.
In addition, the deal is only for the next 18 months after which the studio can produce content on both formats.
"This seems like a move of desperation," Andy Parsons, a member of the Blu-ray Disc Association, told the paper.
The story quotes two executives from Viacom, Paramount's holding company, saying that marketing was included in the deal, and that Toshiba will be using the release of Shrek the Third to promote HD-DVD.
"We provided no financial incentives to Paramount or DreamWorks whatsoever," said Amir Majidimehr, head of Microsoft's consumer media technology group.
While initially the most popular standard HD-DVD sales are falling behind Blu-ray discs, the installed base of Sony PlayStation 3s has started to show its effect.
Although the HD-DVD system is cheaper than Blu-ray it does not have a good installed base among users, and several outlets have gone Blu-ray only.
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