Paramount is poised to drop its support of HD DVD after Warner Brothers’ recent backing of Sony’s Blu-ray technology, in a move that will sound the death knell of HD DVD and bring the home entertainment format war to a definitive end.

Paramount and DreamWorks Animation, which makes the Shrek films, came out in support of HD DVD last summer, joining General Electric’s Universal Studios as the main backers of the Toshiba format.

However, Paramount, which is owned by Viacom, is understood to have a clause in its contract with the HD DVD camp that would allow it to switch sides in the event of Warner Bros backing Blu-ray, according to people familiar with the situation.

Digital Playground has moved from neutral to Blu in the format war. Given recent events, it's not a surprising turn, and the studio's Blu-ray library that debuted with "Pirates" will swell to nine movies by January 11. Coming to the roster are: "Island Fever" 3 and 4, "Babysitters," "Jack's Teen America 3," "Jesse Jane: Sexual Freak," "Hush," "Contract Star" and "Jesse Jane Pink." Studio founder Joone (yeah, only one name) does not credit any picture quality issues in the decision, and even said there was no difference between the two formats. The real reason was consumer demand -- specifically PS3 owners. No mention of how the titles might leverage interactive features, although we're willing to, uh, review sample discs.

Well... we've had SOME confirmation this morning of the details of the Financial Times story from last night. While the studio isn't yet commenting, reliable industry sources are telling us that Paramount is indeed preparing to end their HD-DVD support and announce a return to the Blu-ray fold. Details are currently being finalized, and an announcement is expected as soon as they're complete. Paramount's first new Blu-rays will almost certainly include many of those titles that were cancelled last year, but that were already packaged and ready for shipping, so you could see them in stores very quickly once the studio announces.

Meanwhile, sources are telling us that Universal has also been talking with the BDA, and is looking to follow Paramount and Warner's lead as soon as possible.

On a related note, Times Online in the U.K. is now reporting that as many as 20 additional firms currently backing HD-DVD are also considering defection in the wake of Warner's Friday announcement, including Fujitsu, Lenovo, Kenwood and Pony Canyon (which is a major Japanese film and music studio).

What's more, word is starting to circulate at CES that major big box retailers will begin winding down in-store support for HD-DVD as soon as these studios go public with their decisions. We're told that the industry's major retail partners are already pressuring Paramount, DreamWorks and Universal to go Blu following Warner's decision.

Rumors are also beginning to circulate here that Apple's Steve Jobs may announce the addition of Blu-ray Disc drives to their Mac desktop lineup at next week's Macworld Expo in San Francisco.

We would caution you to keep in mind that all of this should be considered unofficial until the studios make their actual announcements. Things are moving very fast, and the situation is highly fluid. Still, it really looks like this is the end for HD-DVD, and the end of the format war overall. We'll keep you up to date with new developments as they break.

Stay tuned...