Tuesday, September 9, 1997
Source: Los Angeles Times
By Marla Matzer

Six months after the introduction of the digital videodisc format for home video, a start-up company backed by retailer Circuit City on Monday announced a new technical and business model for the industry.

The company, Digital Video Express, or Divx, says it will offer a rental/sales hybrid that solves the problem of piracy feared by Hollywood studios ­ but could create confusion among consumers experimenting with a new format. The announcement was greeted skeptically by video retails and by some of the major studios.

Under the Divx plan, consumers will be offered a DVD for about $5 and can watch the movie for two days; they can then opt to pay additional two-day windows for $3 each. In other respects, the disc will be the same as DVD, offering a high-resolution film in a digital format on a CD-size disc.

Walt Disney's Buena Vista Home Video, Universal Studios, Paramount Pictures and DreamWorks have agreed to release new video titles on the Divx system along with their VHS releases.

The system requires new hardware, to be made by Goldstar's Zenith, Matsushita's Panasonic and Thomson's RCA brands. Hardware and software is planned to be available by summer 1998.

Divx is underwritten by Circuit City Stores and the Los Angeles-based entertainment law firm of Ziffren, Brittenham, Branca and Fischer. Divx headquarters is in Herndon,Va., and will be headed by Richard Sharp, chairman and chief executive of Circuit City. Sharp will continue to work from Circuit City headquarters.

After making less than $1 on the initial sale, retailers would receive no additional money ­ a fact that has beleaguered video retailers up in arms.

"A home video combination of pay per view and revenue-sharing disguised as a disposable DVD" is what Jeff Eves, president of the Video Software Dealers Assn., called Divx in an interview in July.

John Thrasher, vice president of video sales for Sacramento-based Tower Video, said, "I don't see any incentive for retail, and not much for the consumer."

Thrasher recalled a short-lived attempt in the 1980s to create a pay-per-transaction VHS model. "It was in stores in test for about six months before everybody said, 'Our customers are revolting,'" he says.

Sharp contended, however, that "the consumer benefits are quite strong." Divx's main selling points are ease of use (no more late return fees on videos) and flexibility. The viewer can start the two-day viewing period at any point after purchase, instead of having to have it back to the video store on a specific date.

The downsides include cost: Divx players, which include a modem and special encoding technology, will cost $100 more than a regular DVD player. Currently, those start at about $500. And $5 is nearly twice the average national cost of a traditional video rental.

Those resistant to Divx also fear another downside: customer confusion. "I really hope this isn't a replay of Beta versus VHS," says Tom Wolzien, an analyst with Sanford C. Bernstein.

Wolzien notes that while Circuit City commands a dominant 15% of the consumer electronics market, its video sales are dwarfed by giant retailers such as Wal-Mart. It is at those stores where the mass market potential for any technology must ultimately be proven.

On the studio side, Sony's Columbia TriStar and Warner Bros. ­ along with MGM/UA and New Line, which Warner distributes ­ said they oppose Divx. "Our market research surveys show a 2-1 preference for current DVD technology versus the Divx model," says Warren Lieberfarb, president of Warner Home Video. Adds Lieberfarb, "I think [Divx] is obsolete from its introduction.

Thursday September 4 1:54 PM EDT
Company Press Release
Source: Buena Vista Home Video

Walt Disney Studios Will Enter DVD Market

BURBANK, Calif., Sept. 4 /PRNewswire/ -- Industry leader Buena Vista Home Entertainment announced today that it is entering the DVD market in the U.S. and abroad, with product to be available in the U.S. as early as Christmas.

"We've carefully scrutinized the development of this new format at every turn, and we're impressed with the strides that have been made in both technology and security," said Michael 0. Johnson, president of Buena Vista Home Entertainment Worldwide. "We believe the timing is right to now offer Disney's endorsement to this revolutionary format, which provides the highest quality, most advanced in-home entertainment experience. We're confident that our support of this technology will help foster its growth and consumer acceptance."

Buena Vista Home Entertainment's plans for overseas distribution will closely follow the availability of DVD hardware.

Buena Vista Home Entertainment Worldwide is a subsidiary of Disney Enterprises, Inc.

SOURCE: Buena Vista Home Video

Thursday September 4 8:40 PM EDT

Disney Backs DVD With Holiday Product Launch

BURBANK, Calif. (Reuter) - The Walt Disney Co, the leading seller of home videos worldwide, on Thursday gave a strong boost to the emerging market for digital video disks with plans to sel DVD movies this holiday season.

Disney's exact movie titles for Christmas have yet to be determined, but its video distribution wing, Buena Vista Home Entertainment, will eventually market five to six, live-action movies per month on DVD, said Michael Johnson, president of the home video unit.

Like videocassette recorders, DVD players offer users the ability to play movies. But they operate in digital formats on disks the size and shape of audio compact disks and computer CD-ROMs. DVD's picture quality is sharper, its sound is clearer and it doesn't degrade like videotape.

DVD first became available this past winter, but only with partial support from film studios. Like Disney, some filmmakers were concerned about copy protection issues, especially overseas where specific computer coding was meant to protect the movies.

Johnson said Disney acted now because it believed those coding agreements might have been jeopardized if it had not.

"We wanted to make sure regional coding was going to be enforced, and if we waited too long before we entered the marketplace, we felt the regional coding could have potentially broken down," Johnson said.

Disney joins Time Warner Inc.'s Warner Bros. studios, Sony Corp.'s Sony Pictures Entertainment Inc., Seagram Co. Ltd.'s Universal Inc., Metro-Goldwyn-Mayer Inc. and several others into the DVD marketplace.

But clearly, Disney's participation is the most crucial to DVD's success because it is the undisputed leader in home video. Market experts believe DVD sales will closely mirror those in the home video market.

Disney videos claim the top 17 of 25 best-selling home videos worldwide. "The Lion King" is the top-selling title with over 30 million units sold to consumers.

"Disney's entrance into the DVD market insures the success of the next genereaton of home video," Warren Lieberfarb, president of Warner Home Video Inc, said in a statement.

Johnson said Disney will first market its live-action films on DVD because early sales research shows buyers have generally favored those titles.

Reuters/Variety

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