More on the wicked witch........
Divx DVD backers call it quits
news.com
By Brooke Crothers
Staff Writer, CNET News.com
June 16, 1999, 7:30 a.m. PT
Divx DVD, once touted as an able competitor to standard DVD, is being phased out
by its creator and national retailer Circuit City, bringing an end to a technology
which thousands of customers have already bought into.
Digital Video Express announced today that it will cease marketing of the Divx home video
system and discontinue operations, the company said in a statement.
"[Though] sales at participating Divx retailers reflect strong consumer interest in the Divx
feature...unfortunately, we have been unable to obtain adequate support from studios and
other retailers. Despite the significant consumer enthusiasm, we cannot create a viable
business without support in these essential areas," said Richard L. Sharp, chief executive
officer of Digital Video Express and of Circuit City, the majority partner in the Digital Video
Express venture.
"Existing, registered customers will be able to view discs during a two-year phase-out
period," the company said. "We want to thank all our existing Divx customers and regret
that this decision was necessary," Sharp said. "We hope to work closely with all Divx
retailers and customers to ensure that the closure process is as simple as possible."
Divx is a limited-use version of DVD that allows viewers access to movies for 48 hours after
the initial viewing period. After that, a customer has to buy the disc for viewing again. The
technology, developed and marketed by Circuit City, has been criticized for muddying an
already complicated DVD field, which was marked by an early, contentious standards
battle.
Nevertheless, earlier this year, Circuit City claimed that almost 90,000 Divx-enhanced DVD
players were sold in the first three months of national availability, with 60,000 sold during
December of 1998.
This compares to approximately 1.2 million DVD players sold in 1998, according to data
released from marketing research firm InfoTech Research at that time.
Also, at the beginning of the year, Thomson Electronics announced that it was developing
a high-end version of Divx, which it was demonstrating at the Consumer Electronics Show
in Las Vegas. Circuit City also announced then that Kenwood had signed on as a
manufacturing partner. In addition to Thomson, Panasonic and Zenith manufacture
Divx-enhanced DVD players.
Also, in March, shares of Circuit City rose more than 12 percent due to positive
speculation about the future of Divx and the expectation that more companies would invest
in it.
"Digital Video Express will provide a $100 cash rebate to all consumers who purchased
Divx-enhanced players prior to June 16, 1999. Rebate forms will be available at
www.divx.com, participating retailers, and by calling 1-888-639-DIVX," the company said.
Circuit City also announced financial results for the first quarter ended May 31, 1999.
Sales for Circuit City Stores increased 19 percent to $2.69 billion from $2.27 billion in the
same period last year. Earnings from continuing operations rose 104 percent to $42.0
million from $20.6 million in last year's first quarter.
The operating results of Divx for the quarter ended May 31, 1999, and the loss on disposal
of the Divx business "have been segregated from continuing operations and reported as
separate line items on both the consolidated and the Circuit City Group statements of
earnings," the company said. The company also has reclassified its prior year financial
statements to present the operating results of Divx as a discontinued operation, according
to a statement.
For the quarter ended May 31, 1999, the after-tax loss from the discontinued Divx
operations totaled $16.2 million, or 16 cents per Circuit City Group share, compared with
$8.1 million, or 8 cents per Circuit City Group share, in the prior year. The after-tax loss on
the disposal of the Divx business totaled $114.0 million, or $1.12 per Circuit City Group
share, in this year's first quarter, the company said.
"The loss on disposal includes a provision of $3 million, after tax, for operating losses to be
incurred during the phase-out period. It also includes provisions for commitments under
licensing agreements with motion picture distributors, the write-down of assets to net
realizable value, lease termination cost, employee severance and benefit cost, and other
contractual commitments."
"Including the impact from discontinued operations, the net loss for Circuit City Stores was
$88.2 million in this year's first quarter compared with net earnings of $12.5 million in last
year's first quarter." |
