NEW YORK (Reuters) - Wal-Mart Stores Inc has decided to exclusively sell high-definition DVDs in the Blu-Ray format, dealing what could be a crippling blow to the rival HD DVD technology backed by Toshiba Corp.

The move by the world's largest retailer, announced on Friday, caps a disappointing week for HD DVD supporters, who also saw consumer electronics chain Best Buy Co Inc and online video rental company Netflix Inc defect to the Blu-ray camp.

In a statement on its Web site, Wal-Mart said that over the next few months it will phase out sales of HD DVD systems and discs. By June, it will sell only products in the Blu-ray format which was developed by Sony Corp.

"We've listened to our customers, who are showing a clear preference toward Blu-ray products and movies with their purchases," said Gary Severson, a Wal-Mart senior vice president.

The move affects 4,000 Wal-Mart and Sam's Club stores in the United States, as well as related online sites. The stores will continue to sell traditional DVD players and movies.

The so-called format war between HD DVD and Blu-ray has been a thorn in the side of retailers, which have had to commit shelf space to devices from both camps even as they field complaints from frustrated and confused customers.

Next-generation DVDs and players, boasting better picture quality and more capacity, were expected to help revive the $24 billion global home DVD market. But Hollywood studios had initially split their alliances between the two camps, meaning only certain films would play on a consumer's DVD machine.

Like the Betamax-VHS battle in the 1980s, having two DVD standards has dampened sales of both and put retailers in a conundrum of having to either choose sides or sell products that have a chance of becoming obsolete very quickly.

The balance of power, however, tipped toward the Sony camp in January after Time Warner Inc's Warner Bros studio said it would only release high-definition DVDs in Blu-ray format. With that, studios behind some three-quarters of DVDs are backing Blu-ray, although some release in both formats.

Blu-ray also has support from News Corp's 20th Century Fox, Walt Disney Co and Lions Gate Entertainment Corp. Sony's PlayStation 3 game console can also play Blu-ray films.

"So if you bought the HD player like me, I'd retire it to the bedroom, kid's playroom, or give it to your parents to play their John Wayne standard def movies, and make space for a BD player for your awesome Hi Def experience," Wal-Mart's movie and gaming blogger, Susan Chronister, wrote in a posting.

To be sure, Toshiba has secured agreements with studios including NBC Universal's Universal Pictures, Viacom Inc's Paramount Pictures and DreamWorks Animation SKG Inc.

Microsoft Corp's Xbox 360 also currently works only with HD DVD. However, Microsoft said in January it could consider supporting Blu-ray technology at consumers' behest.

Toshiba could not be reached to comment on Wal-Mart's move.

Earlier on Friday, the Hollywood Reporter quoted unidentified industry sources as saying Toshiba was widely expected to pull the plug on HD DVD in the coming weeks.

Toshiba spokeswoman Junko Furuta said none of what was reported in the magazine had been decided. She declined to comment further, saying: "We cannot comment on speculation."

(Reporting by Franklin Paul; additional reporting by Kiyoshi Takenaka in Tokyo; editing by Phil Berlowitz and Gerald E. McCormick)

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