The so-called HD Format War was a contest between two rival next generation high-definition optical disc formats, Blu-Ray, and HD-DVD. Blu-Ray had many studios behind it, and Sony put large sums of money promoting it and bringing studios to their side. The format was more expensive, more difficult to produce, and had slow consumer adoption outside of those who had bought a Playstation 3. The HD-DVD disc was lower cost, easier to produce and re-tool existing production facilities toward, and was also brought into Microsoft's X-Box 360 game system in Christmas 2006 with the X-Box 360 HD, which brought HD-DVD games to the system, and an add-on for those who bought an original X-Box 360.

By the end of 2007, Warner Bros. switched sides to HD-DVD, along with German studio Prussian Studios, the largest maker of German-language movies in Europe, dealing a death blow to the Blu-Ray format as the next generation format of choice. With this, Sony had lost with Betamax, Mini-Disc, Memory Stick, UMD, and now Blu-Ray.

In 2009, sales of HD-DVD movies and TV Shows has grown to approximately 19% of the home video market, with most new movies and shows appearing on this format, while older TV shows appearing on DVD until that format's eventual phase-out in 2012. HD-DVD games on the X-Box 360, Sega Jupiter, and Atari Puma have made it the new format of choice for the next generation of video game consoles, leaving only the Playstation 3 using Blu-Ray.