Circuit City knows that Divx will create confusion...........
Divx players will cost an extra $100 (modem & copy protect).
After purchasing a disk for $5, replays are $3.00 - $3.50.
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Circuit City invests $100 million in digital video
By Bob Tourtellotte
LOS ANGELES, Sept 8 (Reuter) - Circuit City Stores Inc.
Monday unveiled a plan to invest $100 million in Digital Video
Express LP, owner of a technology that could make emerging
digital video disk movies more accessible for consumers.
Digital video disk, or DVD, has been promoted in recent
years as a replacement for analog videocassettes. But as the
technology emerged, it became embroiled in battles between
hardware makers and most recently movie studios concerned about
piracy. The studios were also concerned about how the disks
would affect video rentals.
Unlike DVD, Digital Video Express's technology, called
Divx, allows a user to buy a movie for $5 and play it for two
days. After that, the disk automatically blocks additional
play. But if the user wants to play the movie again, payment of
a $3 to $3.50 fee erases the blocking technology.
A DVD movie currently costs about $25 but can be played an
unlimited number of times.
Like DVD, Divx is a digital technology that replays movies
on a player. Because it is digital, supporters say, it provides
crisper sound and clearer pictures than analog videotape.
Circuit City, one of the nation's largest retailers of
consumer electronics, will own two-thirds of Digital Video
Express following its equity investment. Los Angeles law firm,
Ziffren, Brittenham, Branca and Fischer will own the other
one-third.
The deal, however, will sharply cut into Circuit City's
earnings, causing the company to take a 27 cent-a-share charge
in the year ending in February 1998, and a 14 cent-a-share
charge in fiscal 1999.
Circuit City's shares ended trading up 68.75 cents at
$40.875. The announcement came after trading had ended.
Beyond the charge, Divx's nationwide launch, which is
planned for summer 1998, is sure to cause anxiety among
purchasers of DVD players who cannot decide whether to buy a
DVD player or a Divx player.
"I will admit the possibility for some confusion, exists,"
Circuit City Chief Executive Officer Richard Sharp said in a
conference call with reporters.
DVD players are available now at prices starting at $500,
but users have to pay full price for the movies. Divx players
will cost about $100 more than DVD players when launched, but
the movies only cost $5.
The move is likely to irritate film studios and makers of
consumer electronic products that hve promoted DVD for the past
two years. DVD's backers including Time Warner Inc.'s
Warner Bros studios, Sony Corp.'s Sony Pictures
Entertainment, Toshiba Corp and others.
Divx has the backing of the Walt Disney Co.'s
Buena Vista Home Entertainment, Viacom Inc.'s
Paramount Home Video unit, Seagram Co.'s Universal Home
Video Inc., DreamWorks SKG and equipment makers like Thomson
Consumer Electronics and Matsushita Electric Industrial Co.
Ltd. . |
