(FORTUNE Magazine) – Incoming Sony boss Sir Howard Stringer is immediately being thrust into a new role: peacemaker. For years a battle over the format of next-generation high-definition DVDs has been looming, and now it appears that Sony and Japanese rival Toshiba are actively negotiating to hammer out a compromise standard.

On one side is Sony's so-called Blu-ray technology, which handles more data and has more backers, including most of the consumer electronics world (Matsushita, Samsung, Apple, Dell, Hewlett-Packard, Disney, and Sony Pictures, to name some). Toshiba's supporters, although fewer, are potentially just as powerful, since they include Intel, NEC, and most of the movie studios, such as Paramount, Universal, and longtime ally Warner Bros. Pictures (which, like FORTUNE, is owned by Time Warner). Toshiba's chief virtue is that its technology won't require the equipment makers to retool in order to make HD-DVD players.

The current fight is a near repeat of the original DVD battle between the two camps a decade ago. That ended in a draw, with each side sharing in the royalties from the initial introduction of the DVD. How will this picture end? "The big question now is who blinks," says Warren Lieberfarb, who consults for Toshiba as well as for Microsoft (the latter is neutral in the format war). A happy face could be presented as early as May 17, when the giant E3 videogame conference begins in Los Angeles. But pooling patents is a tricky business, and if a truce isn't called soon, tech-forward consumers will be able to buy Toshiba HD-DVD players as early as Christmas. Of course, a format war would benefit one group--the poor souls who recently bought a plain old DVD player and aren't ready to trade up. -- Adam Lashinsky