Toshiba HD-A2. Image: Toshiba

A pre-holiday retail skirmish in high-definition DVD players has begun. Just days after Wal-Mart (WMT) slashed its in-store price on the Toshiba HD-A2 to $198, Circuit City (CC) and Amazon (AMZN) followed suit by offering the player online for $197.99.

Consumers seem eager to buy the HD-A2, which had been selling on Amazon for $230 and as much as $280 elsewhere. The Toshiba player, which had been one of several top-selling DVD players on Amazon before the price cut, has quickly become the favorite: On Monday morning it was the 24th most-purchased electronics item on Amazon’s site. The next closest DVD player ranked 46.

The low prices could shift momentum in the high-definition format war between HD DVD and Blu-ray, which are vying to succeed today’s ubiquitous DVD. Like mainstream DVD players, HD DVD and Blu-ray players accept DVDs. But they also play high-definition discs in their own formats, which look sharper on today’s large, flat-screen televisions.

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Blu-ray had been seen by some industry watchers as having a better chance of winning the format war, mainly because more Hollywood studios had agreed to release movies exclusively on the format. But Blu-ray technology, which was created by Sony (SNE), is more expensive to produce than HD DVD. The result is that while retailers are jousting with sub-$200 HD DVD players, the most affordable standalone Blu-ray players still cost twice as much.

The Spider-Man trilogy comes out on Blu-ray October 30. Image: Sony Pictures

Meanwhile, each format has amassed a passionate following online. Blu-ray backers argue that Blu-ray’s high-end technology will win out over HD DVD’s more basic approach. They say that Toshiba’s HD-A2, which outputs images in 1080i resolution, is inferior to Blu-ray players that output sharper 1080p. The Blu-ray backers are often fans of Sony’s PlayStation 3, which comes with a built-in Blu-ray drive. HD DVD backers counter that HD DVD quality stands up well to Blu-ray, and that the companies supporting HD DVD have embraced a pragmatic strategy that will beat Sony’s more expensive methods. HD DVD backers are often fans of Microsoft’s (MSFT) Xbox 360, which has an optional HD DVD attachment.

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This week the rivalry will grow more intense. Tomorrow, Sony Pictures will release the Spider-Man trilogy on Blu-ray, marking one of the most highly-anticipated HD releases of the year. Pre-orders of the HD trilogy were the 20th bestselling item in Amazon’s DVD store Monday morning, two slots ahead of the Transformers movie on HD DVD.