To: John Rieman who wrote (32995 ) 5/6/1998 10:29:00 PM From: DiViT Respond to of 50808
Circuit City Sees Minor Delay In Test Launch Of Alternate Video Disk 05/06/98 Dow Jones Online News (Copyright (c) 1998, Dow Jones & Company, Inc.) RICHMOND, Va. -(Dow Jones)- Circuit City Stores Inc. Wednesday said the test launch of its alternate digital video disk, the Divx, will be delayed a few weeks and won't affect the national rollout of the product, which is scheduled for late summer. Analysts who follow Circuit City (CC) and sources close to the company both told Dow Jones the delay was the result of licensing problems with Hollywood studios, though they declined to provide further details. "Circuit City wants to step off with their best foot forward and they figure that if they wait a few weeks, and have a fuller library of titles, the initial launch will go better," said a source close to the company. Divx was met with much fanfare at the Consumer Electronics Show in Las Vegas in January. Circuit City's Chief Executive Richard Sharp gave the first demonstration of Divx, a product that permits a consumer to purchase movies at under $5 for one-time use. Standard digital video disks, the new generation of home movie-playing technology that is expected to one day replace video cassette recorders, have barely gotten off the ground. DVDs have only been available to consumers for about a year. Divx not only threatens to compete with the existing format, but the new technology is also perceived as a threat to the nation's specialty video retailers. Sharp has said he believes the Divx alternative will expand the DVD market because, with disks priced under $5 for one-time use, consumers will make impulse purchases. Once purchased, a person who wants unlimited play on the Divx disk can "convert" the disk for a fee of generally no more than $15. A standard DVD costs $20 to $25. Essentially, if consumers don't want to see the movie again, they could simply throw the disk away. If they want another viewing, they would save the disk and, at any time in the future, complete an electronic transaction via modem to pay for it. A DVD playback machine must be equipped with special circuitry to play a Divx movie, although such a machine can also play standard DVDs. There are expected to be 500 titles available on Divx by year-end, up from 68 as of early February. Last year, four Hollywood studios - Walt Disney Co., DreamWorks SKG, Viacom Inc.'s Paramount Pictures and Seagram Co.'s Universal Pictures - all agreed to provide titles for Divx release. Divx players will be manufactured initially by Zenith Electronics Corp., Matsushita Electric Industrial Co. and France's Thomson SA. All of those companies also manufacture standard DVD players. Circuit City announced in March that San Francisco would be one of two test markets for Divx. About a month later it named Richmond as the second.