With fears still growing that a format war could be damaging for both parties, Toshiba and Sony it seems are talking behind closed doors about creating a format spawn from Blu-ray and HD DVD that takes the best bits from both.

According to a story posted on The Nihon Keizai Shimbun in this mornings online edition and then further reported via Reuters the news agency the two companies stepped up closed-door negotiations around February to find a resolution to the standoff between their competing products.

After reaching a basic agreement that a unified standard would be desirable, they are now looking to develop a hybrid standard that takes advantage of each standard's strengths, the Nikkei said.

Sony is said to have proposed using Blu-ray's disc structure and HD DVD software technology. Toshiba has presented the idea of using HD DVD's disc structure, which is closer to that of current DVDs, and employing Sony's multi-layer data-recording technology, the report said.

The Nikkei report said Sony and Toshiba have already begun briefing Walt Disney Co. (DIS.N: Quote, Profile, Research) and AOL Time Warner Inc. (TWX.N: Quote, Profile, Research) , as well as Hollywood movie studios, for approval of a unified standard and to pave the way for the signing of an official agreement between the rival camps.

Over 200 companies will be affected by the discussions as everyone rams up production for expected hardware and software releases next year.