TechTV | The Origins of the Original Divx

The Origins of the Original Divx

Most people think of DivX as MPEG-4, but there was a movie rental system called Divx that failed.
By R. J. Dunnill
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Editor’s note: “Divx,” as mentioned in this article, is different from “DivX,” the MPEG-4 compression technology. DivX is still in use and DivX players are widely available on the Internet. For more information about DivX, read this article.

Originally known as Zoom TV, Divx was a home video system originally conceived around 1994 by Los Angeles entertainment law firm Ziffren, Brittenham, Branca and Fischer. The firm teamed up with Circuit City Stores (the largest consumer electronics retailer in the US at the time) to develop the idea into a marketable product.

Divx (the name was derived from the company’s name, Digital Video Express) was based on DVD-V, and used MPEG-2 digital video and Dolby Digital surround sound. Divx was a rental system that was practically video-on-demand, charged no late fees, and offered many new rental titles the same day as their VHS equivalents were released.

The national Divx rollout came just in time for the 1998 holiday season. A scant title selection, just two player models, and a limited retail distribution (many Circuit City competitors refused to carry it) hampered Divx. However, the format still managed a surprisingly strong showing during the holidays, and by June 1999, nine months after nationwide sales had commenced, Divx had 10 percent of the DVD market and a catalog of over 500 titles.

Single-source woes

Behind the scenes, Divx was struggling. There was the burden of having to single-handedly build up a brand-new home video format that many Circuit City competitors refused to carry. The costs were a drag on Circuit City stock; financial analysts urged Circuit City to drop the operation and concentrate on its core businesses.

Video rental firms opposed Divx because it threatened to disrupt a lucrative revenue stream: late fees.

The idea of a system designed for metered disc viewing enraged many film buffs and home theater hobbyists, and a virulent anti-Divx campaign erupted on the Internet. Warner Home Video, a driving force behind the sell-through-oriented DVD format, wanted to derail Divx (perhaps in part because it wanted to thwart competition for its upcoming video-on-demand system). Video rental firms opposed Divx because it threatened to disrupt a lucrative revenue stream: late fees.

Despite a commitment from Circuit City to fund Divx through another Christmas season, DVD news sites reported that Circuit City tried to sell off the Divx operation to Blockbuster in spring 1999.

Divx’s Death

On June 16, 1999, Circuit City CEO Dick Sharp ordered the plug pulled on Divx development and marketing. Divx employees learned the news via a mass email.

The billing system would be phased out over a two-year period, during which existing customers could play their discs and add and subtract players from their accounts. Officially, no new customers were to be registered, although some exceptions were made, and $100 refunds were made to those who had purchased players prior to June 16, 1999. Customers who had converted discs to unlimited play (DivxSilver) were given the choice of receiving refunds or using their unlimited play discs for the remainder of the phase-out period.

Player prices were slashed to where they were substantially below their DVD-only equivalents, and disc prices dropped from $4.49 to $1.99, and then to 99 cents. Discs still unsold at Circuit City stores at the end of the summer 1999 were destroyed.

In June of 2001, two years after Divx marketing and development ceased, there was still plenty of consumer interest in Divx, but Circuit City stuck to the phase-out timetable. Six days after the official cutoff date of July 1, 2001, all Divx accounts expired, and Divx became a memory.

R. J. Dunnill is of The Divx Owners Association, and maintains the association’s website.