Paris — A cross-industry debate over the next-generation high-definition optical-disk format turned uglier, perhaps irreparably so, last week after Microsoft and Intel publicly backed the HD-DVD standard over its Blu-ray rival.

Moving beyond the turf war talk of whether PCs or consumer electronics will rule the digital living room, the HD-DVD vs. Blu-ray battle is focusing more on which device — or whose technology — is best positioned to deliver high-definition video throughout the home. The stakes have grown bigger, since any of the devices — including packaged media like Blu-ray or HD-DVD disks, digital recording systems, media PC centers, digital TV broadcast receivers, broadband IPTV set-tops, next-generation game consoles and even digital camcorders — can be combined or integrated in almost infinite variety.

The dispute threatens to bifurcate the computer industry. PC makers Dell, HP and Apple Computer are aligned in the Blu-ray camp while PC parts suppliers Microsoft, Intel, Toshiba and NEC are backing HD DVD.

The battle could even play out in the courts. Maureen Weber, general manager of HP's personal storage business, warned of "legal implications, if Microsoft is using its dominance in the operating system market — virtually a monopoly — to play favorites and hurt the competition."

Many believe Microsoft Corp. stands to gain the most from siding with HD DVD. Microsoft has already succeeded in promoting its proprietary video codec — now SMPTE's VC-1 — into both of the next-generation optical disk formats. By wrapping the HD DVD camp around its finger, Microsoft advances its presence in the consumer market, not only with its content protection scheme but also the interactive software layer for HD DVD.

And that would be "unacceptable to HP," said Weber. "We are hoping Microsoft will support both Blu-ray and HD DVD."

But the two camps are so badly polarized they appear unable to unify the formats. And while recent developments may have unfolded publicly, a fiercer fight could be under way privately as the rivals seek to recruit more studios into their ranks.

After all, many analysts agree, dominance will be decided by which content providers support and release the most attractive titles. Today, the match appears dead-even, with Blu-ray having signed up Sony/Columbia, Tri-Star, Disney, MGM and Fox, while HD-DVD has Paramount, New Line, Universal and Warner Bros.

Ben Keen, chief analyst at market research firm Screen Digest (London), said, "My view is that this [Microsoft-Intel move] is an eleventh-hour attempt to put pressure on the studios that have already 'voted' for Blu-ray and those in the HD DVD camp who were about to 'blink.' "

He noted "the highly significant omission of Warner from the press release" that Microsoft and Intel put out last week. The implication Keen draws is that Warner — which has been in the HD DVD group — might have been the studio most likely to "blink." Keen described the joint announcement as "pretty much the last card that the HD DVD camp can play."

"But," he added, "it's a good one."

Stuart Lipoff, partner at IP Action Partners (Newton, Mass.), believes content providers will consider the protections these two industry giants can offer. "The copy and rights management features in HD DVD along with the support of Intel for chips and Microsoft to include in their OS bundle should be of great interest." The high storage capacity on next-generation DVDs raises the bar in the need for protecting the highly valuable content. He said, "both Intel and Microsoft are trusted and creditable stewards of technology barriers to content pirates."

Then, did the announcement actually help tip the balance?

Kappei Morishita, director of Matsushita Electric Industrial Co.'s entertainment liaison office in Hollywood, thinks it did not. Despite losing that backing to its rival, he noted, the Blu-ray group has "the support of HP, Apple and others with 40 percent of the PC market, 85 percent of consumer electronics companies and 50 percent of Hollywood studios."

Indeed, said Richard Doherty, research director of The Envisioneering Group (Seaford, N.Y.), a consulting firm, last week's Microsoft-Intel announcement is already backfiring.

Dell CEO Michael Dell reaffirmed his company's commitment to Blu-ray just last week, Doherty said .

Doherty, who attended Dell's "Concierge Class" consumer product launch in New York last week, said Dell made it clear that PC companies don't need Microsoft to support a new optical disk format. During the press conference, Doherty said, Dell quizzed reporters, asking them which version of Windows was first to support a DVD drive. Doherty quoted Dell as answering his own question, saying, "The answer is none." Dell said a standard off-the-shelf Windows system has no DVD codec because manufacturers have always provided their own. "So we'll continue to do that."

Asked why Intel Corp. suddenly sided with Microsoft to support HD DVD when most other chip makers were avoiding the debate, an Intel spokesman said the company had grown "respectfully impatient over a multimonth dialogue that didn't go anywhere." Noting that Intel's opinion "goes beyond" a chip maker's view, he said, "We want Intel Viiv PCs [Intel's upcoming entertainment PC platform] to be the centerpiece of the digital home — with all kinds of computing and CE devices and broadband high-definition content working in and around Viiv and our home."

"With HD DVD players coming to market soon, the time was right to look at both formats," he said. "We strongly desire [to have only] one format, and HD DVD is what Intel and Microsoft are backing."

IP Action Partners' Lipoff said Intel was "in a unique position" among chip suppliers because they depend so heavily on the cyclical PC industry. "They have been trying for years to diversify . . . and none is more attractive than the CE products," Lipoff said. "With their Viiv copy management technology, they have a hook to play in this new space, and given the dual use of this copy management technology between both the CE and PC industry, they build their beachhead in the PC space until the CE industry takes off."

In general, chip companies want to know — sooner rather than later — which high-definition optical format will prevail. An executive at a consumer-electronics chip vendor, who spoke on the condition of anonymity, said his company's resources are already strained supporting multiple video codecs. Now, it must also verify that all the interactive software works properly on its new system-on-chip designed for next-gen HD optical disk systems.

Microsoft's push for iHD is no small matter. "Microsoft is trying to displace MHP [with iHD], so they have a big dog in the fight," Lipoff said.

Weber said HP reviewed the "Java used in Blu-ray vs. iHD in HD DVD . . . [and] found Java in Blu-ray was much more mature and robust with complete test suites. In contrast, we found many holes in Microsoft's proprietary iHD."

As Microsoft and Intel shoulder their way into the living room, consumer electronics manufacturers have concerns. They already see the PC being positioned as an indispensable platform for streaming, archiving and distributing content in the home. Microsoft is also expanding in the emerging IPTV market, paving the way for its software platform to become a vital conduit for home broadband links. It's not a stretch to imagine Microsoft promoting, among leading broadband carriers, a new IPTV set-top combined with HD DVD.