When Toshiba announced in February it would stop developing high-definition DVD players, it marked the end of a format battle that looked like it might rival the VHS vs Betamax videotape war of the 1970s and 1980s.

Toshiba's announcement cleared the way for Sony's Blu-ray to take the next generation of video to the waiting world but, with the advance of internet downloads, many in the US are asking whether it is already too late.

According to one view, the format war may have had a serious effect on Blu-ray's prospects of becoming the main form of home entertainment delivery.

Consumers' fear of being left with the high-definition equivalent of Betamax had suppressed take-up of high definition while the war raged. In the meantime, the argument runs, internet downloading (both to rent and to own) has improved so much Blu-ray could be closed out before really getting started.

As downloading improves to the point where it could become the main method of home entertainment delivery, technology analyst Rob Enderle of the US-based Enderle Group is among those who believe Blu-ray may have serious trouble becoming established.

'Blu-ray dropped 40% after the end of the year in terms of sales, and downloads continue to accelerate,' he says. 'There's now a variety of services and, as they update their connectivity to provide increases in bandwidth, they're dropping in boxes that will increasingly download and store movies.'

Meanwhile, according to Enderle, the format war meant Blu-ray was released before it was ready and it is proving difficult for manufacturers to offer the players at a price that will allow them to become established.

'HD DVD shipped to market with a complete product, and Blu-ray shipped early, even though their product was incomplete, so they would have something in-market to compete. Now Blu-ray (players are) having trouble hitting the $300 mark, let alone the $200 price point to roll the market, and its 2.0 products aren't even out yet. At $300-plus, it's awful pricey for a recessionary time,' he says.

Analyst Roger Kay, president of the US's Endpoint Technologies Associates, also believes the switch to downloads is only a matter of time. 'Deciding the standards war between Blu-ray and HD DVD is helpful for the optical standard, but most players in the industry think this is the last generation of optical format,' he says.

'Download will become viable, and once it does it's the best option by far, from everybody's perspective. You've seen it in music - if you look at the drop in the CD market since iTunes, I think that's the structure of what happens with videos.'

The US studios, however, take a very different view. 'If you said you can have every movie available digitally, and all you have to do is point and click, and you can deliver to your TV, and it's the highest sound and video quality, then that's a pretty compelling product,' says David Bishop, president of home entertainment at Sony Pictures. 'The problem is it doesn't exist.'

He says download has a future in the delivery mix, but it will be a long time before it becomes a major part. 'Download will continue to grow, but it's a tiny piece of our business right now, and it's not really efficient yet,' he explains.

'The downloads take a long time and the quality is not close to what you would get out of Blu-ray. The bandwidth in the home is not big enough, and won't be big enough for people to do downloads in a meaningful way for probably the next five years.'

Bishop also says any sluggishness in player sales is down to a lack of supply rather than demand. 'We're quite pleased with the early results, post the format war. Our Blu-ray sales domestically are up about four times year-over-year, so we're off to a good start. We could even be selling more. The player demand is exceeding supply, which is creating some misperception in the market because people are looking at the sales performance at retail but not focusing on the fact we're out of stock in many stores.

'So if there's a problem, it's that all the manufacturers got caught a bit flat-footed when the format war ended, and simply didn't have enough product to meet demand.'

Mike Dunn, president of home entertainment at Twentieth Century Fox, says his figures also show that reports of the death of optical are very premature. 'We released Juno domestically on Apple (download) and DVD and Blu-ray on the same date and, excluding the rental market, we sold 900,000 DVD and Blu-rays on the first day, and we did about 15,000 downloads,' he says.

'The second day we sold another 500,000 DVD and Blu-rays, and we did another 1,000 or 2,000 downloads.

'So downloads right now are a very small part of the business. I see it as a blip on the horizon for the next five years, and then you're going to start to see a ramp-up.'

Dunn accepts the format war slowed down take-up of Blu-ray, but not for long. 'It sure didn't help. I think it provided some confusion, and as a result consumers who would normally have jumped in right away didn't. Now that it's finished, it's going to require a bit of investment in advertising but I think we can recapture that momentum,' he says.

For the independent sector, however, downloads offer a promising way forward, says Endpoint's Kay, because, with the costs of production and distribution being high relative to their revenue, internet distribution puts them almost on an equal footing with the studios. Blu-ray, on the other hand, offers no advantages to independents, and its higher costs may act as a barrier.

Looking ahead, Kay believes the mainstream will ultimately be digital download for large-screen (TV) watching. 'The reason it's mostly small-screen (hand-held devices) now is that bandwidth is still constrained and the files for small screens are more manageable.'

He also insists Microsoft's Xbox will be an important potential platform for downloads. 'Microsoft has yet to fully unfold the power of Xbox, but it's an integrated solution, like Apple's. Microsoft provides hardware, software and some of the service. Currently, Xbox can be used as a DVD player or as a media extender for Windows Media Center, but there's no reason it can't be used as a target for a streaming service.'