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DVD Express to fold into Maximum Holdings

The Internet's top seller of digital video discs is merging with Maximum Holdings, a builder of video game portals.

DVD Express, the Internet's top seller of digital video discs, is merging with Maximum Holdings, a builder of video game portals, CNET News.com has learned.

In a deal expected to be announced next week, shareholders of the Los Angeles-based Maximum, which was acquired by giant video game publisher Eidos last month, will take a 51 percent stake in the new company, sources close to DVD Express said.

Representatives from Maximum and DVD Express declined to comment.

To industry observers such as Geoffrey Kleinman, founder of community site DVDTalk.com, a marriage between the two companies could mark the next wave in the video game market: video game consoles that show digital video discs (DVD) movies.

"The merger will give DVD Express a significant head start on preparing for DVD and video game convergence," Kleinman said.

DVDs are discs that look and act like CDs but contain movies instead of music. Because DVDs can hold more information than videotapes, proponents claim that they provide better sound and viewing qualities.

DVD's are one of the fastest selling entertainment products in years, Forrester senior analyst Jeremy Schwartz said. Schwartz projects that 14 million DVD consoles will be sold by 2001.

Video game sales have also been booming for years. Last year, video game sales earned about $6.3 billion in sales. In contrast, movie box office receipts totaled $6.7 billion and video rentals totaled $8 billion.

"This merger is bringing together two of the most aggressively growing markets," Schwartz said.

Some analysts predict that next year will be a watershed period for DVDs, after Sony debuts its Playstation2 video game player--the first game console with the capacity to play CDs and DVDs.

"If Playstation2 does well, it will increase the number of platforms that DVDs can be viewed on," Kleinman said." DVD players, computers with DVD-rom drives and now console gaming systems."

Sega and Nintendo also have plans to release DVD-compatible play stations next year.