Vid Retailers Still Wary As Divx Plans September Rollout

LAS VEGAS‹Just three months after its debut in two test markets, Divx will roll out nationally in September‹with or without the support of home video retailers.
Divx‹which was created in a joint venture between Circuit City Stores and a Los Angeles law firm, Ziffren, Brittenham, Branca & Fischer‹debuted last month in Richmond, Va., and San Francisco, with participation by Circuit City stores in both markets and Good Guys! outlets in San Francisco. But at the Video Software Dealers Assn. (VSDA) Convention this month, VSDA president Jeffrey Eves indicated that retail attendees and consumers weren't interested in this rival DVD format.
"They don't have a single video store endorsing Divx," Eves said at the convention, held July 8-11 in Las Vegas. "And only a tiny percentage of consumers are interested in it even after the format is explained to them, and most flatly said they were uninterested."
Divx spokesman Josh Dare acknowledged that no additional retailers were committed to the format, but he said other dealers are expected to make announcements throughout this summer.
Blockbuster, the nation's largest video chain, won't be one of those dealers.
At a briefing following his convention keynote address, Blockbuster Entertainment chairman/CEO John Antioco adamantly expressed his opposition to Divx.
"Personally, I don't think it's a good technology," he said. "It's invasive to the consumer with phone jacks and tracking. It's Big Brother watching." Referring to Divx's ad campaign, Antioco added, "We don't think it's the best way to watch movies at home."
Antioco, though, said Blockbuster will expand the sale and rental of DVD titles to 1,000 of its 3,000 stores by the end of the year. To date, the chain has been testing the format in about 100 stores in Richmond and San Francisco, the same test markets as for Divx.
Blockbuster is planning to launch a major DVD advertising campaign to support expansion, according to a spokeswoman. Details of the plan will be announced at a later date.
Other dealers said Divx's pricing strategy devalues video in general and confuses consumers.
Divx titles are priced at approximately $5, but consumers pay additional fees following a 48-hour free viewing period.
"Divx is sending the wrong message about the value of video product," said Tower Video VP John Thrasher. "That's the frustration with Divx."
Retailers attending VSDA also expressed frustration with a Divx model that cuts out the need to return rental product to stores‹eliminating foot traffic and potential follow-up business.
They were, however, high on the idea of DVD rental, something underscored by the warm response given to Warner Home Video's announcement of the national expansion of its DVD rental program, tested in Dallas, Philadelphia, Richmond, San Francisco, and Portland, Ore. (Billboard, July 18).
Despite the lack of VSDA membership support, Dare said, the company won't delay Divx's national launch.
"We're in a position that, being a month old, a lot of retailers are taking a wait-and-see attitude," he said.
He added that even if no other retailers carry Divx, the 500 Circuit City stores would be sufficient to take the product national.
"We had some good meetings with retailers at VSDA to gauge the interest and lack of interest out there," said Dare. "But we're moving ahead with or without them."
Divx has 60 software titles available from Universal Studios Home Video, Buena Vista Home Entertainment, 20th Century Fox Home Entertainment, Paramount Home Video, DreamWorks Home Entertainment, and MGM Home Entertainment.
Another 90 titles will be available in time for the national launch, and three new players will also come on the market. New players from RCA, ProScan, and Panasonic are expected to be priced at $499, which is consistent with the Zenith player already on the market.
On the software side, Dare says, Divx is "working real hard with Paramount" to set a Divx release date for "Titanic," which arrives on video Sept. 1 (Billboard, June 20) and is expected to be the year's biggest-selling title. "Right now it doesn't seem likely," he says.
While Eves and Blockbuster's Antioco expressed doubt about the Divx format, a new consumer study by Yankelovich Partners added new concerns.
According to the survey, conducted with 1,938 VCR households in April and May, 61% were "not very" or "not at all interested" in the Divx format. As for DVD, 51% were "not very" or "not at all interested," with recordable DVD registering at 47%.
The survey also indicated that familiarity with DVD had doubled since the firm released the findings of an initial survey conducted in the fall of 1997.
In 1997, only 18% of those surveyed said they'd heard of DVD. In 1998, 37% of respondents said they were familiar with the format. According to the survey, 62% now say they haven't heard of DVD, down from 81% in 1997.
Eves urged that suppliers that choose to release titles on Divx should also make them available on so-called "open DVD."
Dare wouldn't comment on the survey. "You can forget about surveys when you look at sales," he said. "Our experience in the market tells us different information."
However, Dare wouldn't disclose Divx player or software sales and would only characterize them as "at the high end of our expectations."
He added it was consistent with Circuit City policy not to disclose sales figures.