The DIVX KILLER
News & Views - 14 April 1998:
The Divx Killer is a nationwide mail-order DVD rental program
that includes a rent-to-own option. Starting today, you can rent
DVD's from the convenience of your web browser from a company
called NetFlix. Here then is the story behind The Divx Killer:
Since the Digital Video Express announcement last September, the
outcry among home video enthusiasts has been vocal and defiant.
This so-called "additional feature" to "Open" DVD has been seen for
what it really is: a competing, incompatible replacement format that
was not only designed to eliminate DVD, but also the middleman--the
video rental retailer.
The Anti-Divx sentiment runs rampant in Internet news groups,
message forums, and web sites, in magazines and newspapers, in
electronics and video stores, at trade shows and industry seminars--
everywhere the Divx concept is mentioned it is derailed by strong
opposition.
Yet, despite our posturing, Divx has moved forward, lining the
pockets of participating companies with payoffs rumored to be $20
million each, while at the same time ignoring the consumer who has
emphatically stated no interest in the format.
Divx, who is about to open itself to test markets, is so desperate to
make a positive showing that one of the test markets is Richmond,
Virginia, home to the corporate headquarters of Divx and Circuit City
(the majority stakeholder). In card-playing terms, that is called
"stacking the deck."
Well, it is time for DVD to trump Divx. I have that trump card, and I
call it The Divx Killer.
Before we figure out how to kill Divx, we need to discuss what Divx
offers. Divx is supposed to be an alternative for rentals, but as we
all know, the concept extends far beyond that. For the initial expense
of around $4.50, a Divx disc offers:
o A 48-hour play period that starts when you
first play the disc
o Repeated playback for an additional fee
o Convenient disposal; shelf it/trash it
o Unlimited playback for an unlock fee on
select titles (Divx Silver)
o Unrestricted playback for select titles
(Divx Gold)
Let's pretend for a moment that you go to your nearby Divx dealer
one Saturday afternoon and pick up five movies. We'll even go as far
to say that you don't have to pay tax. That is five movies for $4.50
each, total $22.50. Now, let's say that you watch two of those
movies on Saturday night, one on Sunday afternoon, one on Wednesday,
and one on Friday. You have had a full week to watch all five movies
(which is more than most people need). One of the movies offers the
unlimited viewing "Divx Silver" option, and since you really liked
the movie, you decide to buy it for an additional fee. The remaining
discs you shelve, although you have no intention of ever watching
them again.
What would you say if I told you that you could do the same thing
with Open DVD, with the same degree of convenience, only cheaper?
What if you were able to rent those five movies on DVD through
your web browser and have them shipped to your home for $22?
What if you had seven days to watch those movies? What if you
could also purchase that favorite movie and keep it permanently?
And what if returning your other discs was as simple as putting them
into a post-paid mailer and dropping them into your mailbox?
What if I told you that nationwide rentals using this program are
available today?
This DVD rental/purchase program is The Divx Killer, and the company
that is bringing it to you is NetFlix. NetFlix is a new online video
store that specializes in rentals and sales of movies on DVD. Their
grand opening is today.
Using conventional, off-the-shelf DVD, NetFlix has created a service
offering that coincidentally strikes at the core of the Divx format
offering.
Going back to the list of features offered by Divx, the Divx Killing
features offered by NetFlix are as follows:
o Seven day rentals which start from the time you
receive your shipment.
o Unlimited playback for the duration of that
seven-day rental period.
o Convenient return by post-paid mail.
o Rent-to-own of any rental title you choose to keep.
o Unrestricted playback on any player of all titles,
after all, DVD is an Open format.
First and foremost, The Divx Killer is "Open" DVD. DVD is
available now. Hundreds of DVD titles are available nationwide.
There are no test markets. There are no high-pressure salesmen
trying to sell you a new Divx-capable player. You are not charged
if you play a DVD on a different machine. Your DVD player is not
tied to a phone line or registered to an account. With DVD, you
control what you watch, where you watch it, and when.
The seven-day rental period of The Divx Killer is liberal not only
in the sense of its length, but also in the fact that it does not
penalize you for the time involved with shipping. The rental starts
the day your discs arrive, not the day you order them. And return
shipping is as simple as mailing a letter, except in this case even
the postage and mailer are provided. (It is even environmentally
friendly: the return mailer is refolded from the original shipping
container.)
There is no spiraling cost with The Divx Killer, nor a limited
viewing period. In our Divx example, had you watched a movie on
Sunday then decided to rewatch it the following Friday, you would
have been billed an additional $3.00 on top of the $4.50 you already
spent. Remember that Divx viewing periods only last 48 hours. With
an Open DVD rental, your viewing period lasts as long as you
have possession of the disc.
The core to The Divx Killer is the rent-to-own program, which
NetFlix calls Like It? Keep It! With this program, you can rent a
DVD then have your rental fees applied towards the purchase price
at a later date. Let's say that you are not sure you want to pay
$19.95 to own Contact, so you decide to rent it instead for $4.00.
After watching it, you decide you want to keep the disc. All you have
to do is send email to NetFlix and your $4.00 in rental fees will be
applied towards the $19.95 price. You are billed for $15.95, and you
now own the disc outright. Isn't that cool?
I have said from the beginning that Divx offers nothing over
conventional DVD. Now, with NetFlix offering a rental/purchase
program that is second-to-none, DVD definitively offers something
over Divx. I think that this program is the stake in the heart of
Divx, and a clear sign that DVD is here, and here to stay.
With nationwide rentals, more people are going to be willing to spend
that $300-$400 on a DVD player. With more people buying DVD
players, Fox, Paramount, and Spielberg will have the market they
need to release their movies on DVD. Remember the fervor of DVD
March Madness? By the holiday season this year, the DVD
market is just going to be unbelievable!
To take a line from a favorite musical of mine (appropriately titled
Rent), "Viva, la vie, DVD!"
Now, I know that some of you are wondering about my involvement
with NetFlix, and why I brought up the topic of The Divx Killer. I
first heard about NetFlix in January just prior to CES. In February,
while under the terms of a non-disclosure agreement, I spoke
extensively with NetFlix President and CEO Marc Randolph, who
described the operation in detail. I was extremely impressed. At
that point, I decided to become an Associate Site and to accept
advertising from NetFlix once my current advertising obligations
were met.
On that day, Fox announced their participation with Divx. Knowing
the details of the NetFlix Like It? Keep It! program, I decided to
downplay the significance of the Divx announcement by bringing up
the concept of The Divx Killer. This served three purposes: it
provided some optimism during a trying time, it reflected my opinion
of the program that would eventually be unveiled, and it kept the
Divx company at bay wondering what they would have to counter. It
also served as a springboard for discussion of other ideas that might
be harmful to the Divx concept.
After more discussion with Marc (this was a very long process) I also
accepted an offer to be a contributor to the NetFlix site. I decided
to pursue this free-lance effort because I thought it would be fun
and because I felt it would not detract from my duties on my own web
site. You will see my work at NetFlix every two weeks or so in a
column called "Off The Shelf," where I'll talk about aspects of DVD
that I consider to be fun and cool. There may be other areas where I
contribute to their site; I'll be sure to let you know about them.
The DVD Resource Page will feature NetFlix banners and buttons, and
periodic top-ten and new-release listings. Other than that, these
pages will remain unchanged. I pride myself in running an independent
web site relating to DVD, and I want to assert here that this charter
remains unchanged. I will still provide the news, views, and reviews
that you have come to expect from these pages, and I will strive to
continuously improve these pages and their content. You deserve
nothing less.
I welcome your comments.
dvdresource.com
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