Wal-Mart moves to the Blu-ray camp

The HD DVD format is reeling from another body blow.

The nation's largest retailer, Wal-Mart Stores Inc., said Friday that it would sell movies and players only in the rival Blu-ray format at its 4,000 discount stores and Sam's Clubs.

Wal-Mart said it would continue to sell its HD DVD inventory over several months, then devote more shelf space to Sony Corp.'s Blu-ray. The announcement from the country's biggest seller of DVDs comes amid a growing number of defections from the Toshiba Corp.-backed HD DVD camp.

Earlier this week, online movie rental service Netflix Inc. said it would exclusively stock Blu-ray discs, and electronics retailer Best Buy Co. said it would "prominently showcase" Blu-ray hardware and movies as a way of steering consumers to the format.

"Up to this point, it's been death by a thousand cuts," said Ross Rubin, director of industry analysis for NPD Group, a market research firm in Port Washington, N.Y. "This one may be the unkindest of all."

The HD DVD format has been losing momentum since January, when the last major studio to support both formats, Time Warner Inc.'s Warner Bros. Entertainment, announced it would sell its high-definition movies exclusively on Blu-ray discs. The shift gave the Blu-ray camp about 70% of the home video market, with Warner, Walt Disney Co., 20th Century Fox, Lions Gate Entertainment Corp. and Sony Pictures.

Toshiba has deals with Universal Pictures and Paramount Pictures and DreamWorks Animation SKG Inc. Toshiba could not be reached Friday to comment on Wal-Mart's announcement. In a sign of the high stakes in this format war, the Tokyo-based Toshiba said in a December earnings call that it anticipated losing $370 million on its HD DVD equipment this fiscal year, which ends in March.

Before Warner's defection, Toshiba had been in active discussions with Fox and Warner to secure support for the format. It sought an exclusive content deal with Fox similar to one it reached in August 2007 with Paramount and DreamWorks in which it reportedly offered $50 million to $100 million for Fox to abandon Blu-ray, according to two industry sources. Fox ultimately walked away from the offer.

Toshiba had hoped to use the lure of a potential Fox deal as a sign of its continued turnaround in an effort to retain Warner's continued support for the HD DVD format.