Paramount is said to have a get-out clause in its contract with the HD DVD camp which enables it to back out if Warner Bros went Blu-ray only, says the Financial Times. Warners did exactly that last week.
However Paramount has subsequently issued a denial, saying there is no truth to the FT report.
The decision by Warners to back Blu-ray exclusively has been prompted by studio fears over the state of the US economy, according to a top executive.
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Warners explains Blu-ray move
Warners entertainment group president Kevin Tsujihara said rising gas prices were causing people to focus on their discretionary expenditure, and so Warners had decided to end consumer confusion by only backing Blu-ray from the end of May.
Warner Bros' decision has been spurred in part by a slump in DVD sales in 2007, with sales expected to fall further in 2008, says Reuters.
The HD DVD Promotion Group is understandably disappointed by Warner Bros decision. It said in a statement last week:
"While Warner's decision is a setback for HD DVD, the consumer has benefited from HD DVD's commitment to quality and affordability - a bar that is critical for the mainstream success of any format. We believe widespread adoption of a next generation format will ultimately be determined by the consumer."
Technology analysts Understanding And Solutions says Warner's decision will also help strengthen Blu-ray and help end consumer confusion over which high def format to adopt.
Understanding And Solutions says high-definition players - that excludes games consoles and PC drives - could be found in up to 36 per cent of US households by 2011, but only in 11 per cent of Western European homes.
This raises the prospect that both high def formats could fail, with movie fans plumping for legal movie downloads instead.