LOS ANGELES (Reuters) - DreamWorks Animation SKG Inc DWA.N said on Tuesday it was locked in an exclusive deal to distribute DVDs on Toshiba Corp's 6502.T HD DVD format even though the Japanese electronics maker plans to quit the technology.

“We have a partnership with Toshiba and have an obligation to see this through,” DreamWorks Chief Executive Jeffrey Katzenberg said on Tuesday.

“As you know, we have been well-compensated for our support. It really is in their court at this point to really declare what the next step will be. We’re poised either way to jump into the marketplace when the conditions are right to do so,” he said

Toshiba, which began selling HD DVD players in March 2006, has sold 1 million players and recorders. But this month it declared it would quit the technology after a bitter battle against Sony Corp's 6758.T rival Blu-ray, which won more studio and retail support.

In August, Viacom Inc's VIAb.N Paramount Pictures and DreamWorks signed exclusivity deals to distribute next-generation films on HD DVD for the next 18 months.

Shortly afterwards, the New York Times reported Viacom executives with knowledge of the deals said Paramount and DreamWorks would get a combined $150 million in financial incentives for their commitment to HD DVD.

DreamWorks plans to release the DVD version of “Bee Movie” next month and is waiting to hear back from Toshiba on how to proceed.

“We said, we have a release coming up on ‘Bee Movie.’ What would you like us to do?,” Katzenberg told Reuters in an interview.

JP Morgan analyst Barton Crockett said the Blu-ray market was still small although he expected DreamWorks would like to have the issue settled by the 2008 holiday season.

“It might mean they’ll lose the opportunity to sell ‘Bee Movie’ on Blu-ray, although the market for Blu-ray is still pretty small and the offset is that they’d get money from Toshiba, which may in fact be more,” Crockett said. “But I’m sure they’ll like to have this settled by Christmas.”

Other HD DVD-backing studios like General Electric Co's GE.N Universal Pictures said this month they will switch to Blu-ray after Toshiba officially pulled the plug on HD DVD.