Circuit City demonstrates Divx player

Television Digest with Consumer Electronics, Jan 12, 1998

Divx released roster of 69 films, mostly catalog titles, that will be on introductory slate later this year. List also includes new video releases such as film Mousehunt. List is headlined "Coming Soon from Divx: These Titles Plus Hundreds More..." But Sharp said "most exciting titles we're going to have when we launch" aren't films on list but "ones that are just hitting home video from all of our studios."

Sharp conducted private demonstration for us in suite, using preproduction Zenith prototype player he said was produced by LG. Prototype was only working Divx hardware sample in Las Vegas, as Panasonic and Thomson showed nonworking mockups on show floor. In demonstration, Sharp scrolled through series of on-screen Divx menus he said proves that Divx is consumer-friendly system. Thomson will have national player rollout in July or Aug., followed by Panasonic month or 2 later, Sharp said. Sharp said hardware from at least 3 suppliers will be available nationally by fall. He also repeated prediction that additional hardware and software "partners" will sign on with Divx by time system launches nationally.

Demonstration discs we were shown were produced by Nimbus, which Sharp described as "someone we've been working with during the developmental process, and we would expect them to be doing some of the replication for us." But Nimbus won't be Divx's exclusive replicator, he said. Replicators "have stars in their eyes" because "they look at Divx as an opportunity to generate very significant volumes," Sharp said. "They want to see Divx succeed and they're working very hard to make the economies work for us." He said "there'll be a lot of Divx discs out there." Based on assumption that traditional video rental store buys one copy of VHS tape and rents it 50 times, retailer will sell equivalent number of Divx discs, he said.

As for software distribution, Sharp said that besides video software retailers, "we're having discussions with people outside the traditional distribution channels," such as grocery and drug chains. He said: "We're covering the entire landscape here." However, software won't be available everywhere at start, he said: "We're not going to launch with 50,000 outlets carrying the software, just as the video rental industry didn't start with 30,000 rental outlets. It started with a few outlets, and it grew as the market grew."

Sharp said that if Divx is controversial system, it's because it typifies other new technology introductions in CE industry that were feared would upset balance of existing products. He said partial purpose of staging Las Vegas demonstrations was to debunk common Divx myths, repeating claims that those who criticize Divx don't have full understanding how it works.

Movie discs will carry $4.99 list, but are expected to sell for $4.50, Sharp said. Vast majority of consumers won't want to throw disc away but will "store it on their Divx shelves" for viewing again weeks or months later, he said. To promote building of personal Divx libraries, discs will come packaged in regular CD jewelbox compatible with thousands of CD storage devices on market, Sharp said. He repeated that Divx will have recycling program for those intent on discarding discs that have been viewed.

Consumer who buys Divx player calls toll-free number to activate credit-card account. Once account is activated, basic disc is good for 48-hour viewing period that starts when "play" button is pressed. But Sharp said that contrary to popular belief, movie can be stopped, paused, searched and started again without limit during 48-hour play. Status screen shows how much viewing time is left. Additional 48-hour viewing periods can be purchased for $3 or more, with pricing decision to be made by individual studios. So-called "Divx Silver" allows one-price upgrade for unlimited play, with tab also to be decided by studio. Sharp said unlimited-play "Divx Gold" discs also remain option for studios that might want it.

Status of unlimited number of movie discs can be tracked by memory built into player, which reads serial number embedded in "burst" code of individual Divx disc. Player's modem is called periodically during off-hours by Divx processing center in Va. to update billing information. Activity charged to credit card is summarized on activity screen. Divx won't send customers printed invoices but is studying e-mail delivery of account summaries for those who want printout, Sharp said. Player also can download messages from Divx computer. We were shown hypothetical application in which onscreen display announces availability of movie discs in neighborhood video store. Sharp said Divx computer can convey such messages via. individual zip codes.

Other details: (1) Sharp said system won't abruptly cut off end of movie even if 48-hour window expires. However, menu will advise consumer to finish viewing without additional stops, starts or pauses. (2) Divx will take "100% inventory risk" on movie discs in launch period as means of supporting retailers, Sharp said. He said small Divx hardware base at start won't give software retailers "velocity" of rental turns they're used to with existing VHS movies. (3) Sharp said rollout will be supported in 2 test markets and nationally with print and broadcast ad campaign being designed by Arnold Communications, Boston-based agency that produced 5-min. "concept" promotional video shown in Las Vegas suite.