Yes, so it seems.
But I don't see a compromise coming. I suppose they could cross license and all future players would play both- but I think both camps are too eager for "total victory" to compromise. That time may have passed. Unless the high def disc concept goes nowhere, and they decide their only hope to make anything will be to combine forces. Let's face it, if this drags on 3 or 4 years, HVD or some other format will come out and the studios will likely defect to the "one true format." But right now, those holographic units are extremely expensive.
I doubt that Wal-Mart will force the studios to do anything. The studios would probably be more than happy to sell their wares thru other pipelines, especially where they won't be forced to price cut to the bone. Wal-Mart needs them more than they need Wal-Mart. After all, if you're looking to buy movie "X" you'll go where it's for sale, and not just buy some alternative movie.