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DivX Networks touts new studio deals

Pending Hollywood announcements could lend new legitimacy to underground technology once pegged as the MP3 of video.

REDWOOD CITY, CALIF.--Internet video bad boy DivX Networks is poised for a breakthrough deal that would see two major Hollywood studios announce support for its technology by Christmas, a top executive at the company said Tuesday.

DivX already has a partnership with News Corp.'s 20th Century Fox to encode films for an airline movie-rental service. Now its video file format will be used in planned Internet video-on-demand services that would be available to consumers by the first half of 2005, DivX President Shahi Ghaman told CNET at the Consumer Technology Ventures Conference.

Ghaman declined to say which studios plan to sign on. But he said he expects deals with all five of the major Hollywood studios eventually, citing the industry's desire to back an alternative to Microsoft and the pending next generation of the Windows operating system, code-named Longhorn.

"Anyone who has read a speck about Longhorn becomes terrified of it and becomes a friend of DivX," he said.

No hard feelings?
New studio deals would be the clearest signal of d?tente yet between Hollywood and a company closely identified for years with illicit video file-swapping. Billions of files encoded in DivX have changed hands over the years without the industry's OK, leading some to label the format the MP3 of video.

Since then, DivX Networks has developed technology to prevent unauthorized copying of files, and licensed its format for a handful of legitimate services, including a DVD release for the Muppets a few years ago.

A follow-up deal in 2002 saw Tacoma, Wash.-based airline movie-rental service APS launch using DivX to encode programming provided by 20th Century Fox and a bevy of other content owners. Alaska Airlines currently uses APS' digEplayer media players, which store up to 30 full-length movies and other content.

According to Ghaman, at least two unnamed studios are now planning to use DivX for so-called progressive download scans, allowing consumers to purchase movies directly from the Internet without going through the video store or cable and television networks.

"If (DivX Networks) can get studios and content providers on board, no doubt that would be a good win for them," said Jupiter analyst David Gartenberg. "There are cases where content providers are looking for alternative solutions, where they may not want to deal with Microsoft, Apple Computer or RealNetworks. But it will be a huge uphill challenge for them," he said.

The missing link
Entertainment companies and device makers are looking to new video formats developed for the Internet to potentially connect the PC to the TV screen--a goal that pits the DivX technology against a host of offerings from better-established rivals, including versions of the proposed MPEG-4 video standard, proprietary technology from Microsoft and RealNetworks' multiformat Helix platform.

A host of such services has sprung up in the past few years, including studio-backed movie download service MovieLink, Walt Disney's over-the-air MovieBeam service, Starz Encore, CinemaNow and a newly launched Internet VOD service from Akimbo. Most of those use Microsoft's Windows Media format.

Ghaman said DivX Networks expects to unveil the latest version of its software, DivX 6.0, in the fourth quarter of 2004. Ghaman said the upgrade offers 33 percent better compression than H.264, the latest video codec approved for use in the MPEG-4 standard.

He also said DivX is cheaper to deploy than MPEG-4 and Windows Media, in part because it requires less computing power, allowing consumer electronics makers to use cheaper chips.

Ghaman said consumer electronics makers have shipped 20 million non-PC devices that support DivX, including Ethernet-connected DVD players.

"The PC is not going to be the endgame for convergence," he said, "although it is a critical evolutionary step."