In various online forums, enthusiasts have reported seeing the Toshiba HD-A2 HD DVD player available in stores for $198, significantly less than its common price of $230-$280.

Such low prices could shift momentum in the high-definition format war between HD DVD and Blu-ray, which are vying to be the successor to 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 televisions.

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“We reduced our HD DVD Toshiba player, the generation-two, to $198 earlier in the week,” Wal-Mart spokeswoman Melissa O’Brien confirmed. “It’s happening now, and that’s really all I can tell you. We don’t give any information on what we’re planning to do for the holidays. We know HD DVD and Blu-ray are going to be popular items this holiday season for some of our customers. … They will be more popular this year than they were in previous years.”

O’Brien said rumors that each Wal-Mart store would stock only 18 units of the Toshiba player were false. “There are no limited quantities for stores or purchases.”

Samsung P-1400 Blu-ray player. Image: Samsung

If the cut-rate Toshiba HD DVD players prove especially popular, Wal-Mart’s move could also set up a holiday-season retail showdown with Best Buy (BBY), Circuit City (CC) and others who rely on popular items to lure shoppers into stores. Those other retailers could feel pressure to stock their own low-cost HD-DVD players to drive store traffic.

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As I wrote in June:

Blu-ray has an early lead, but that doesn’t count for much. What matters is, who will have the lowest-priced high-definition players at a decent quality level when mainstream consumers finally start buying HD?

If the mainstream starts buying HD players this holiday season, expect to see HD DVD surge ahead of Blu-ray in a big way. Market makers like Wal-Mart will run with whatever player they can price below $200, just to draw people into stores. And most people in the mainstream won’t necessarily buy 10 HD movies; they’ll buy one or two, and wait for the studios to follow the installed base.

And if HD DVD sells big, you’d best believe the Hollywood studios will follow. Aside from Sony, they really don’t care which HD format wins – just as long as they get to sell a lot more movies.

It’s not clear what the Blu-ray camp will do to respond to the price cuts. While the Sony-backed Blu-ray format has more support from Hollywood studios as mentioned above, Blu-ray players also cost more than HD DVD to manufacture. That’s why Blu-ray players continue to cost more than $400 while HD DVD is available for half the price.

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Transformers on HD DVD, released October 16, had a stronger launch week than any HD title so far.

Blu-ray does have its technical advantages. Chief among them: its discs hold more information than those from the HD DVD format, potentially allowing studios to pack more special features and higher-quality audio onto a disc. Blu-ray’s manufacturing costs will also come down over time — but if HD television buyers choose this holiday season as the time to seriously consider getting a high-def player, Blu-ray will be at a disadvantage because of some of the choices Sony made in developing the technology.

“Sony has great technology, but Sony many times makes closed technology,” said Randy Giusto, group vice president of the mobility, computing, and consumer markets at technology research firm IDC.

Meanwhile, there are signs that this could indeed be the season where holiday shoppers open their wallets for HD equipment.

The summer blockbuster Transformers, released on HD DVD on October 16, has had the strongest debut of an HD movie so far, selling 190,000 copies in its first week.

Also, the large-sized LCD market is expected to reach 370 million units by the end of 2007, according to researcher iSuppli. That could create a hunger for high-definition players that connect to them. “iSuppli expects 20 percent unit growth for monitor panels, 35 percent growth for notebook panels and 51 percent growth for the TV panel market in 2007 compared to 2006,” said Sweta Dash, director of LCD and projection research for iSuppli.

The cost of HD players at Wal-Mart:

• Blu-ray at Wal-Mart: Sony ($488), Phillips ($498) and Samsung ($448 and very limited; not in all stores)
• HD DVD players at Wal-Mart: Toshiba ($198) and RCA ($298)

To hear an interview with a director of the Blu-ray Disc Association, click here.