But the resulting discord could revive opportunities for on-demand TV, according to Gartner.
Laura Behrens, a principal research analyst at Gartner, explained that the motion picture industry hoped to introduce the next-generation DVD on a single format late in 2005.
"But the studios are now evenly divided between Blu-ray and HD DVD, guaranteeing a long market battle," she warned.
"The costs will be immense, in everything from realigned strategic relationships to manufacturing costs to consumer packaging and marketing.
"Eventually one format will win, or companies will develop affordable technology to use both, but Fox's decision will delay that moment until at least 2007."
Blu-ray technology, backed by companies including Sony, Apple, Dell, HP, Panasonic, Sharp and Samsung, together studios including Disney, MGM and now Fox, aims to put 50GB of data on a two-layer disc, enough for more than four hours of HD content.
However, the completely new storage architecture is more expensive to produce than HD DVD hardware and software.
In contrast HD DVD will hold up to 45GB on three layers, but discs can be made in today's factories with relatively minor modifications.
The technology is backed by Toshiba, NEC, Sanyo and others, with promises of players on the market for Christmas this year. Paramount, NBC-Universal, Warner and New Line have announced plans to release about 70 movies in the HD DVD format this year.
Gartner expects that content owners will need to direct some of their attention away from the disc format war to the existing HD channel offered by television and create video-on-demand libraries and IP television.
These providers will not completely displace DVD technology among consumers, but they can gain market share while the format war rages.
The analyst firm advised technology providers to "wait no longer" and cater to both formats if they can. "If you can't, decide whether to act aggressively for a big payoff or defensively to minimise losses if your choice doesn't win," said Behrens.
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