It is a battle reminiscent of the titanic 1980s tussle between the video formats VHS and Betamax. Two of the world's technology giants are locked in a fight over rival formats for the latest vehicle for viewing films at home: high definition DVD.

Promising a fantastic viewing experience and more space for extra features, the new generation of DVD players bring to home movies the same rich picture quality expected to transform television watching in Australia.

But there are two formats for the new technology and Japan's electronics industry and Hollywood studios are deeply divided over which one they are championing - high-definition DVD (HD DVD) or Blu-ray.

Just as in the historic battle between Sony and JVC for control of the emerging video market, the designer of the successful format will net hundreds of millions of dollars of royalties.

Sony, which lost the video battle to JVC's supposedly inferior VHS, will be hoping it fares better this time in its fight against Toshiba's less capacious but cheaper HD DVD.

The contest began in earnest over the weekend when US stores began stocking the first players for Sony's Blu-ray technology (confusingly made by Samsung) priced $1,100. The cost is almost twice that of the Toshiba player, which was launched three months ago with both research Groups and competitors claiming that Toshiba is buying the market.

Some Hollywood studios - such as Warner Bros and Viacom - are supporting both formats, but most of the entertainment industry has opted for one or the other.

In Sony's corner are the computer giant Apple, Samsung and Dell, and the Hollywood studios Disney and 20th Century Fox.

Backing Toshiba's are NEC, Microsoft, Intel and Universal.

In the $50bn-a-year world gaming market, HD DVD will support Microsoft's Xbox 360 and Sony's Playstation gaming will host Blu-ray.

Both technologies offer deeper, richer colours, which are said to give an "almost 3D-like" picture quality, and surround sound. High-definition DVD reads data using a blue rather than a red laser, which has a shorter wavelength, allowing more information - essentially images - to be stored on each disc.

Blu-ray discs will be able to store up to 50GB and HD DVD 30GB of information - up to 10 times more than a normal DVD, which stores less than 5GB.

Users will also be able to make instant changes to a programme, skipping scenes, say, rather than having to return to the main menu.

For Hollywood and other content providers, an important advantage is that the new machines allow better copy-protection, helping prevent the multi-billion pound trade in pirated DVDs.

Consumers won't have to discard their old DVDs because they will play on the new machines (though the new discs will not play on old DVD players).

Despite the claims being made for the new players, some industry watchers believe the future of home movies and recorded TV shows lies not in physical players and discs but in cyberspace.

In the next few years, the arrival of internet video will allow people to instantly order and view films by broadband on their television sets; they won't need a shelf of videos, DVDs or HD DVDs.

Adam Vaughan, online editor at Stuff, said the magazine viewed the battle of the formats as "a red herring".

"It's being talked about as a format war but we think we will just skip to internet video in the next few years," he said.

"It's a bit like SACD (Super Audio DC) and DVD-A (DVD Audio). We were promised that they would be the future of how to listen to music because they offered much better sound quality.

"But in fact everyone went for MP3, which is lower in sound quality, but more versatile. I think ordering movies over the internet will be more convenient."

Format wars

* BLU-RAY

Developer: Sony

Technology companies: Apple, Samsung, Dell

Hollywood studios: Disney, 21st Century Fox, Warner Bros, Viacom

Games consoles: Sony Playstation

Storage: Dual layer discs hold 50GB - 10 times that of a normal DVD. Sony is developing a 200GB disc

Films available: The Terminator, House of Flying Daggers, Crash

Cost: $1,100 player (from US).

Quote: "To take the DVD to the next generation, the customer experience has to be more exotic. Blu-ray offers far more capacity and the potential for 3G and interactivity." - Sony boss Howard Stringer

* HD DVD

Backer: Toshiba

Technology companies: Microsoft, NEC, Sanyo

Hollywood studios: Universal, Warner Bros, Viacom

Games consoles: Microsoft Xbox 360

Storage: Dual layer discs hold 30GB - six times that of a normal DVD

Films available: The Bourne Supremacy, Apollo 13, The Last Samurai, Van Helsing

Cost: $750 player (from US). A recorder that can store 130 hours is launched in Japan next month, $3,500

Quote: "HD DVD is destined to be a key driver in the development of the consumer electronics, IT and entertainment industries." - Yoshihide Fujii, vice president, Toshiba