Beyond the technical details like tracking speed and tilt is a serious tussle over how to divide – and protect – the billions of dollars in royalties from the licensing of this technology and the content sold on the discs. Also at stake is an effort by electronics makers to prevent emerging Chinese rivals and well–established Silicon Valley computer makers from making significant inroads into the home entertainment business.

"This is a very intense conflict over intellectual property," said Warren N. Lieberfarb, a driving force behind the development of the original DVD format. It has the added overlay, he said, "of the Japanese, Korean and European consumer electronics industries fearing China's aggressively emerging consumer electronics industry as well as the PC industry."

In November, the HD DVD camp's specifications were endorsed by the forum's steering committee. The victory was significant, but tellingly contentious. The format was not approved until the third ballot, and only after voting rules were changed and several companies abstained. The Blu–ray Group did not submit specifications for a read–only disc, which Hollywood is eager to have for movie sales and rentals.

The HD DVD group may get an additional lift in February, when the Walt Disney Company, Microsoft and Sanyo are expected to take over leadership of the DVD Forum.

Copyright infringement is another worry. After the rapid spread of illegally copied DVDs, Hollywood is pushing both technical groups to come up with new security measures to protect their movies. Neither group has developed a prototype that satisfies the movie industry – a major impediment to a commercial launch.

"We are very much focused on both picture quality and content protection," said Peter Murphy, senior executive vice president and chief strategic officer at the Walt Disney Company, which has about one–fourth of the home video market. "The consumer electronics manufacturers can come up with the technical standards for the next–generation discs, but unless we also agree on the content protection standards, many of the studios may choose to wait before releasing content in the new format."