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Audio and Home Theater News
 June 16    

Divx is Dead: Digital Video Express,
LP to Discontinue Operations

      HERNDON, Va., June 16 /PRNewswire, with additional reporting by Gordon Brockhouse -- One of the most reviled formats in consumer electronics industry has bitten the dust. Digital Video Express, LP announced today that it will cease marketing of the Divx home video system and discontinue operations, but existing, registered customers will be able to view discs during a two-year phase-out period.

     Digital Video Express had planned to bring the pay-per-view DVD-based format to Canada later this year. But the format never took off in the U.S., despite a strong effort from Circuit City Stores, Inc., the largest consumer electronics retailer in the U.S. and the majority partner in Digital Video Express. Since Divx was never sold in Canada, Canadian consumers are unaffected by the format's failure.

     "Sales at participating Divx retailers reflect strong consumer interest in the Divx feature," said Richard L. Sharp, chairman and chief executive officer of Digital Video Express and of Circuit City Stores. "The majority of customers purchasing DVD players in Circuit City stores have selected players that include the Divx option. Unfortunately, we have been unable to obtain adequate support from studios and other retailers. Despite the significant consumer enthusiasm, we cannot create a viable business without support in these essential areas."

     For American Divx buyers, Digital Video Express will provide a US$100 cash rebate on purchases of Divx players made prior to June 16, 1999. Rebate forms will be available at http://www.divx.com, participating retailers and by calling 1-888-639-DIVX. The rebate will ensure that no Divx customers have paid more for the Divx player than they would have paid for the least expensive, comparable DVD player available at the time of their purchase. All Divx-featured DVD players are fully functional DVD players and will continue to operate as such. All Divx discs, including those previously purchased by consumers and those remaining in retailer inventories, can be viewed on registered players anytime between now and June 30, 2001. Subsequent viewings also will be available during that period. Discs can no longer be upgraded to unlimited viewing, known as Divx Silver. Customers who have converted discs to Divx Silver can continue viewing the discs until June 30, 2001, or can receive a full refund of the conversion price at their request. Divx expects to provide registered owners with written notification of the details related to the system phase-out. Effective today, Divx will no longer register new customers.

     "We want to thank all our existing Divx customers and regret that this decision was necessary," Sharp said. "We hope to work closely with all Divx retailers and customers to ensure that the closure process is as simple as possible."

     Circuit City Stores, Inc. is incurring an after-tax loss of US$114.0 million related to the disposal of the Divx business. The loss includes provisions for commitments under licensing agreements with motion picture distributors, the write down of assets to net realizable value, lease termination cost, employee severance and benefit cost and other contractual commitments.

Gordon Brockhouse


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