Circuit City, 4 studios unveil Divx plan

Adding an entirely new wrinkle to the evolving tale of the digital videodisc, Circuit City Stores Inc., a large chain retailer of consumer electronics and appliances, announced Monday it has reached licensing accords with several studios and DVD hardware manufacturers for a new DVD-rental scheme it is calling Divx.

The plan revolves around Divx’s new encryption technology, which allows for temporary access to a disk’s contents — much like a videotape rental but with no return factor. Utilization of the Divx system requires a DVD player that can read and translate the technology — something that Circuit City chieftain Richard Sharp estimates could add $100 to a typical retail pricetag of $400 to $600 at present.

Sharp said Monday that the Walt Disney Co., Paramount Pictures, Universal Pictures and DreamWorks have all signed on for the Divx process, as have hardware manufacturers Zenith Electronics, Thomson Consumer Electronics (makers of the RCA brand) and Matsushita Electric (makers of the Panasonic brand).

No grandfather clause

Previously manufactured DVD players cannot read the Divx encryption and therefore can’t use the plan’s software. Nor is there universal software support for Divx — something that appeared to exist when homevideo giant Disney finally embraced the new technology last week (Daily Variety, Sept. 5).

Warner Bros. Home Video prexy Warren Lieberfarb, whose studio was conspicuously absent from the Divx-support group, has considerable doubts about the format’s purpose and longevity.

“This concept is an effort to improve on the existing video rental model, but it will be superseded by electronic transmission (in the near future),” he said. “So why bother creating an interim product when our industry is in need of creating a (long-term) growth product?”

But Michael O. Johnson, prexy of Buena Vista Home Entertainment, countered that Divx just represented another way of reaching hesitant consumers who know and prefer the rental model.

“This is just another strategy in the DVD world,” Johnson said. “The consumer will decide … it’s not for us to decide for them.”

The Divx technology will be licensed and sold through Digital Video Express LP, a newly created limited partnership between Circuit City and the Los Angeles law firm Ziffren, Brittenham, Branca & Fischer, which was instrumental in setting up and establishing the licensing agreements crucial to the plan’s launch and ultimate acceptance.

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