The technology, developed by Divx with $100 million in financial backing from retail giant Circuit City (CC), enables users to bring home a disc for an expected price of around $5 and view a movie. The Divx technology is not a direct competitor to DVD but adds additional capability to DVD. It does, however, require a special DVD player.
If a viewer wants to continue to watch the movie after expiration of a 48-hour period (which begins when the disc is played for the first time) or buy the disc outright, the playback unit connects via a modem to a central database that can set up an account and "unlock" the content for further use. If the user doesn't like the movie, he can dispose of the disc.
The new format could cause some confusion among consumers, since multiple DVD and DVD-like standards are emerging, but there may be an increased supply of titles because Hollywood studios to date have been reluctant to release content onto DVD for fear of having content pirated.
"It addresses the number-one fear of Hollywood studios, which is competing with pirates," says Ted Pine, an analyst with market research firm InfoTech. Divx technology would reduce demand for pirated products by allowing the branded product to be priced at levels close to that of lower-quality pirated products, Pine surmises.
Already, Walt Disney Corporation, the leading seller of home videos worldwide, said it will release content using Divx technology through its Buena Vista Home Entertainment distribution arm. The company just last week also gave a boost to the emerging market for digital versatile discs (DVDs) with plans to sell DVD movies this holiday season.
Paramount Pictures, Universal Pictures, and DreamWorks SKG have also promised to release titles for Divx-enabled playback units.
The new technology may also boost sales of movie titles by reducing the risk of buying something a consumer doesn't like. "Basically what this [Divx] is trying to do is combine the impulse, low-risk nature of video rental with the retail sell-through model," says Pine.
Confusion among consumers may arise because discs which use the new technology cannot be read by regular DVD movie players, but Divx-capable DVD players can play back DVD titles. DVD-Video allows playback of titles only, but allows users to play full-length movies with subtitles in different languages, and offers digital multichannel surround sound, parental ratings control, and the ability to change viewing angles. The new Divx technology will also offer these features.
Pine discounts the idea that confusion could hurt DVD or Divx sales, saying the two will likely be marketed side-by-side in stores with distinctive packaging and signs. DVD-Video might even become a premium-priced product featuring "collectible" classic movie titles and "all the bells and whistles," such as director's notes and multiple viewing angles, Pine says.
Expected by mid-1998, the new DVD players with Divx technology will be shipped under Thomson's RCA and ProScan brands and Zenith's Inteq brand. The players are expected to cost around $100 more than current DVD movie players.