Just say NO to Divx

This page contains my views on Divx vs DVD. Most of the insights and observations are by various people on the net, not me. I've tried to be fair, and present the best arguments for both sides. However, I own a DVD player (Creative PC-DVD Encore) and am therefore biased. More information (also biased one way or the other) is available from the Divx corporation itself, the DVD Resource and the Say No To DIVX site. The NO-Divx logo above was stolen from the Tech Zone (now defunct?).

  1. What is DVD?
  2. What is Divx?
  3. Advantages of Divx vs buying DVDs
  4. Disadvantages of Divx vs buying DVDs
  5. Advantages of Divx vs renting DVDs
  6. Disadvantages of Divx vs renting DVDs
  7. Why you, as a retailer, do want to sell Divx discs
  8. Why you, as a retailer, don't want to sell Divx discs
  9. Pro vs Anti-Divx arguements on the net
  10. Why I bothered to write this.
  11. Links

What is DVD?

DVDs are metalized plastic discs the size and shape of standard music CDs, however they hold vastly more information. A DVD can hold several hours of high quality video and audio. The DVD video standard also allows for extra features, so a single disc can hold multiple versions of a movie, alternate soundtracks, subtitles in various languages, a documentary on making the movie, deleted scenes, out-takes, bloopers, cast bios, trailers, video games, and anything else the producers can dream up to put on there. The discs contain menu systems which allow point and click access to these features.

DVDs can also hold data (28 times as much as a CD-ROM), and many newer computers have DVD-ROM drives. These will play large reference packages (ie encyclopedias), or huge games (ie Riven) without swapping CDs. They also play movies (either on the monitor or on a TV),

As of 4 Dec 1998, over 1,212,000 standalone DVD players, and over 2,000,000 DVD-ROM players had been sold to retailers in the US market. So the format is well established.

DVDs may be rented locally from many video stores, including Blockbuster Video and Hollywood Video. Prices generally range from $1 to $4, for 1 to 7 nights. They may be purchased in most video stores, large department stores (ie Walmart, Kmart and CostCo), and on the internet from DVD Empire, Reel.com, DVD Express, and Amazon.com. List prices are typically $20 to $30, but most stores discount heavily. NetFlix offers an interesting ``rent to own'' program, where you can rent a movie and if you like it, keep it for the remainder of the purchase price. They also have the best customer service I've ever dealt with. Used DVDs may be sold at useddvd.com, or traded at the DVD Resource.

What is Divx?

Divx is a new pay-per-view version of the DVD movie-on-a-cd format. If it becomes popular, I believe it will:

Divx is a variant of DVD video being marketed by Circuit City and a law firm. The discs are cheap to buy, currently $4.49. Divx discs are encrypted and cannot be played in normal DVD players nor in the DVD-ROM drives in newer computers. Divx players are $100 to $200 more than equivalent DVD players, and can play standard DVDs as well as Divx ones. Every time you play the movie, or any part of it, the player remembers. Every week or so, in the middle of the night, the player calls the Divx mainframe and uploads a log of everything you've watched. The Divx company computers decide what your bill is, and charge it to your credit card. Their current billing practices are the first 48 hour period (starting when you insert the disc and press play) is free. You may watch the movie as often as you want during that period. Playing any part of the movie during any subsequent 48 period is $3.25. Currently, there is no charge for having a Divx account.

The discs are burned with barcoded serial numbers so the Divx computer can track them individually. The divx computer will give the free viewing period for a disc only the first time it appears in any player. This means there is no profitable market for used Divx discs, nor any profit in renting them. The players contain extra menus and programming for account status, downloading new price lists, and a mailbox of messages from Divx Corp.

Divx is targeted for mass-market, non-videophile consumers. DVE claims Divx is intended to be cheap, simple, and convenient. The main selling point is the low initial cost of the movie discs. Divx is betting people are so annoyed at returning rental VHS movies, they will pay $500 for a Divx player and $4.50 each for the movie discs. In the name of simplicity, the Divx discs are stripped down to just pan-and-scan, with no options or extra material. To offset the cost of the Divx circuitry, the players are the cheapest, bottom of the line models. To further avoid video piracy, Divx discs are encrypted and watermarked, which reduces the image quality.

Short of cracking the encryption scheme and setting up a competing billing server for the players to phone home to, Divx discs cannot be profitably rented by anyone but the Divx corporation itself. If the format becomes popular, it will put many video rental stores out of business. Rental can beat the price, selection and value, but not the convenience.

Divx is currently being aggressively advertised. They're going to be spending about $100M between June and Christmas (since cut to $60M). The campaign is somewhat unscrupulous. They tend to concentrate on the advantages of digital video in general over VHS tape, as if these features were exclusive to the Divx variant of DVD. Strong rumor says employees of The Good Guys, a retail electronics chain in the San Francisco bay area, are being ordered not to say anything negative about Divx, even if it's true, on penalty of termination. See the DVD Resource for more details. Store displays of Divx players use DVD discs, to avoid showing the poor quality of the Divx releases.

I believe the Divx format will fail, leaving anyone who buys into it with a collection of useless discs, and a low-quality, overpriced DVD player. In the meantime, it will hurt the parent format, standard DVD. It will confuse consumers, slow sales, delay releases, delay production, and waste everyone's time. It will also hurt Circuit City's stockholders.

Advantages of purchasing Divx discs vs purchasing DVDs:

  1. The initial purchase and viewing of Divx discs is cheaper. You'll have to watch a Divx disc about 6 times to match the list price of a typical DVD (about 4 or 5 to match typical discount prices).

  2. Additional viewings can be purchased conveniently. All you do is stick the disc in the machine, hit play, enter the child lockout password, press the agree to pay button, and pay the credit card bill when it comes.

  3. The divx computer individually tracks every disc and player, including what phone number they call in from. So if your discs or player are stolen, Divx can tell the police where to find them.

Disadvantages of purchasing Divx discs vs purchasing DVDs:

  1. The recurring ``rental'' costs will end up costing you a lot more.

    I've shown off my Highlander disc (with the extra scenes!) to friends at least 20 times. At Divx prices that would have cost me $4.49 + $3.25 * 19 = $66.24 (except that Divx doesn't release movies with extra scenes).

    I think the The Rocky Horror Picture Show would cost me about $320 a year.

    However the real victems are families with small children. Watching the Lion King every other day for a year would cost $596. Alternating with a second title would double that.

    Divx offers a parental password control that prevents playing a movie if it will incur a charge. However it will be very difficult to explain to children why they can't watch a movie that's sitting right there on the shelf. Effectively, the parental lockouts just mean you can't tell the kids to go watch a movie, you will have to start it for them.

    The silver disc system may let you avoid these huge charges for some movies, see below.

  2. The first play is free only for the first person to ever play the disc. If you give the disc to someone else, even during the initial 48 hour period, they will have to pay the rental fee. This also means there is no resale or rental market for the discs.

  3. Browsing a disc to show someone a scene will cost as much as a full viewing.

  4. The contents of the disc are stripped down. There aren't any alternate endings, bloopers, deleted scenes, bios, games, or other cool stuff. Most Divx discs so far are cropped down to pan-and-scan, without a widescreen option. There are now two widescreen Divx releases.

  5. Additional viewings of DVDs are even more convenient. All you do is stick the disc in the machine. Most movies will start automaticly.

  6. You have to buy a Divx player, which costs more and does less (for you). The cheapest Divx player currently available is $400 list ($300 if you can find a clearance sale), and is a very inferior model. The cheapest independent DVD player I've seen is $300 list (sales as low as $249), $100 less than Divx.

    If you already have a computer, you can add a DVD-ROM and decoder card for about $170. It will display on both your computer screen, and on a TV. I recommend the Creative Encore internal DVD-ROM kit with Dxr2 mpeg decoder card.

  7. There are only four Divx player models currently available. All will play DVDs and are comprable to the low to middle class DVD players. They generally cost about $100 more than their DVD counterparts (except at CC, where they inflate the DVD player prices. Shop arround.).

  8. Divx image quality is inferior to DVD. Divx and DVD discs are encoded with several anti-piracy mechanisms. In addition to the four used on DVDs, Divx discs have triple DES encryption and watermarking. The watermarking technique used produces a "raindrop" or "gunshot" distortion effect in the image. This was very visible on the Zenith players, to the point of distracting from the movie. The newer models still have it, but it's far less visible.

  9. The selection of Divx titles will always be poor.

  10. You have to agree to the Divx Customer account agreement. This is a masterful piece of legalese. I seriously doubt I perceive all the ramifications, yet I still find it a very disturbing document. Here are some excerpts [with my interpretation]:

  11. Divx becomes another Big Brother watching you.

  12. The format is tied to the company.

  13. You must open an account with Divx. This requires giving them your credit card number. Debit cards will also work.

  14. You must have a landline phone. You must give it's number to the Divx company. That means it will be hard to have a divx player in remote cabins, or in mobile environments like boats or RVs.

  15. The Divx players contain a mailbox for sending you messages, ie unsolicited electronic junkmail.

  16. The corporation can "turn off" a disc in your collection. For example, an artist sued because Devil's Advocate was released with a sculpture too similar to his own. The studio backed off and will re-issue the DVD with the artwork digitally obscured. The original disc will be a collector's item. If this happens with a Divx disc, it will probably become unplayable. After all, Divx or the studio could get sued if they sold you a 48 hour permission to play that disc. This could also happen if Disney puts a film on moratorium, or a pay per view cable station buys exclusive rights to show a film during a particular month.

  17. There are no competitive checks and balances in the Divx system. There are also no price guarantees. If it's accepted, they can set the prices to anything they want. They can change the billing policies at any time. The players just upload your viewing history. The central computer decides what to bill, and it can be reprogrammed at any time.

  18. Circuit City was selling DVD and VHS players, while simultaneously, quietly developing the Divx system to attack DVD and VHS rental. Then they abandoned DVD owners as "lunatic fringe early adaptors". Many people feel Circuit City's upper management is dishonest, and broke faith with it's customers. How can we know they won't radically raise re-viewing fees. How can we know they won't reduce the viewing period to two hours? How do we know they'll deliver the movie titles, in reasonable quantities? How can we trust anything Divx says?

  19. The Silver disc system

  20. The Gold disc system

  21. Other problems with the Divx concept:

Advantages of purchasing Divx discs vs renting DVDs:

  1. The disc never has to be returned.

  2. The disc is not pre-used. There's no chance a previous renter has scratched it.

  3. The initial viewing period doesn't start until the disc is first played.

  4. Since you don't have to return Divx discs, you won't be tempted to rent something else on impulse while returning the rental. This is an advantage for consumers, but a disadvantage for the stores, they don't get the repeat business.

Disadvantages of purchasing Divx discs vs renting DVDs:

  1. Divx is much more expensive. Local store prices range from $.99 (overnight non-new-release) to $3.75 (three night, new release). NetFlix charges $4 for a 7 day rental.

    Divx costs $4.49 for the first viewing period, and $3.25 for each additional one. Usually by the time you get around to watching the movie a second time, it's off the new-release wall at the video store. So it's reasonable to think of Divx as costing $4.50 for new release rental, and 3.25 for catalog rental. That's far more than most video rental places charge.

    Lets assume you love movies, and watch a couple new ones a week. That's about 100 movies a year. Lets say you really like 20 of them, so you bought them on DVD to watch over and over. The other 80 you rent. Since Divx has about 240 titles, and DVD has about 2600, an 1 to 11 ratio, you can get 9% of those 80 on Divx. That's 7 discs, at $4.49 each. The remaining 73 you rent normally on DVD, for around $1.99 each in most markets. ( 4.49 - 1.99 ) * 7 = $17.50. Add in the $100 higher cost of Divx players (If you shop around, you'll see that anywhere but Circuit City they really do cost $100 more). Watching those 7 movies on Divx cost you $117.50 more than DVD over the first year.

  2. Renting from NetFlix is more convenient than Divx. You order through the web. The discs arrive in the mail within a couple days. You have a week to watch them, and then just drop them in the outgoing mail.

  3. Divx undermines the video rental business. If Divx catches on, the video rental places will have to start laying people off, then closing down. Some of them will be hired on by video sales places, including Circuit City. However, most of those avenues are already staffed. There isn't enough margin in selling Divx discs to hire many retailers.

  4. Divx has higher environmental impact, because more of them have to be manufactured to meet the same viewer demand. Currently most videos are sold to video rental stores. Lets say a video store buys 10 copies of a new release, and rents each one out 10 times. If the movie were on Divx, the same 100 households would require 100 copies of the disk (and packaging) to be manufactured. This means 10 times the amount of plastic, aluminum, and wood pulp are consumed. It means 10 times more waste from the production plant. It means 10 times more gas used to ship the product to market.

  5. The discs aren't recyclable.

  6. The larger production runs of Divx discs place more load on the factories. The factories are already unable to meet the demand for DVDs. If Divx is consuming large chunks of their capacity, other products will be delayed.

  7. Most of the items under ``Disadvantages of purchasing Divx discs vs purchasing DVD discs'' also apply here.

Why you, as a retailer, do want to sell Divx discs

  1. If you're a upper level executive for a large chain, Divx might give you, personally, a kickback.

Why you, as a retailer, don't want to sell Divx discs

  1. Poor profit margin: Divx give you a smaller profit margin for the same shelf area. Divx discs sell for $4.49. DVD discs generally list for about $25, and are often discounted to around $20. Montgomery Ward and other retailers are profitably selling DVDs for $14.95 to $17.99.
    list priceyour cost
    (approximate)    		your profit
    Divx$4.49$4$0.49
    DVD$25$14$11

  2. Frequent returns from DVD owners: Divx is a new format deliberately designed to be incompatible with existing equipment. Most of the people who have bought DVD players so far, are "techies", and know better than to buy Divx discs. However, their friends will try to buy them Divx discs as Christmas presents. There will also be some customers who buy Divx discs, and try to play them in DVD players. These discs will be returned, because they're Divx.

  3. Frequent returns from CD owners: Divx discs look like CDs. Customers will confuse them with soundtracks and try to play them in cd players. Some of the less technically sophisticated ones will realize they're movies, and still try to play them in CD players. These discs will be returned, because "They don't work". (DVDs are packaged in a different case that can't easily be mistaken for a normal CD.)

  4. Opened returns can't be restocked and resold: Divx discs come with one pre-paid 48 hour viewing period. But only for the first owner. If a disc has ever been put in a Divx player and started, it no longer has that free 48 hour viewing period. When a disc is returned to your store, you can't tell if the customer really couldn't play it, or just didn't like the movie. You can't test it in a store player, because that would either burn the 48 hour viewing period, or cost you the $3.25 re-viewing fee. That's assuming you even have a registered store player. Even Circuit City doesn't register their sales floor demo machines. All you can do is send returns back to the distributor (if they'll take them), refuse open returns, or don't sell Divx.

  5. Negative public opinion: All the current DVD owners are strongly opposed to Divx. Most of them are telling their friends not to buy Divx. Some of them are broadcasting their dislike on the net. They also don't like stores that sell Divx. They will go into stores, pretend interest, refuse to buy anything, and harass the sales people. If they're "discovered", they tell other customers not to buy Divx, and even advise them to go to other stores. They will even attempt to organize boycotts and picket lines.

  6. Sealed returns can't be restocked: The divx haters can distroy a disc without opening the package. They just put the entire package in the microwave for 3 to 5 seconds. The microwaves will go right through the paper and plastic package, and vaporize the thin metal layer in the disc. Without opening the package, you can't tell if a return has been sabotoged. (You can try this with a CD you don't care about. It looks pretty cool. Just put it on a glass plate, and keep it at least an inch from the walls of the microwave.)

  7. Lack of demand: Independant polls indicate about 1.5% of the public would consider buying Divx. The Divx company itself says it only hopes to obtain 15% to %20 of the rental market, after 5 years. That means very few of your customers are going to be interested.

Pro vs Anti-Divx arguments on the net.

In the last few days, a number of pro-Divx posters have appeared on net forums, and a few pro-Divx web pages have appeared, for example www.prodivx.com. Each side claims the other is lying, and being paid by various business interests. I suggest taking a step back, and carefully comparing the two sides. Try to verify the claims for yourself.

While you're reading the web pages and forum postings, consider these points.

Why I bothered to write this.

  1. I own a DVD player. I believe Divx will hurt my ability to rent or buy movies on DVD.
    1. Divx is trying to persuade studios to release movies exclusively on their proprietary format.

    2. By pushing a competing format, they are confusing the consumers, slowing down the acceptance of DVD. This slows down the release of movies on DVD.

    3. Divx panders to the lowest level, producing poor quality releases. The image quality is poor, and the feature selection is non-existant. Their attempts to obtain exclusive releases could prevent me from buying good versions on any media.

    4. Divx requires more discs to be produced to satisfy the same number of viewers. So it consumes a larger portion of the DVD factories' capacity. This delays DVD releases.

    5. Divx will hurt the video rental market. It will close stores and drive up prices. This will make it less convenient for me to rent videos, and reduce my selection.

  2. I find the Divx concept personally offensive. The idea of a ``service'' that does nothing but collect money every time I use something I have already bought is disgusting. It reeks of corporate greed. The monitoring of viewing habits invades the privacy of users. The deliberately reduced quality of the presentation strikes me as inane.

    I knew about Divx before I bought my player. I decided that I wanted to vote, with my money, for DVD.

  3. If Divx succeeds, it will validate the idea of pay-to-use media. The idea will infect other systems,

  4. Divx is a parasite. Divx claims to create a new conduit for money to flow from consumers to studios. It attracts studios with big flashy promises about the size of that flow. Then it attracts consumers with big flashy promises about the movies available in that format. Most of those promises are false. After the initial startup, the maintenence cost of that pipe will be paid for by the studios and the consumers. The studios have to pay the extra costs for the Divx encoding and production, and they get less money for each copy until and unless it's watched 5 times. The consumers have to buy a more expensive machine, and pay to use it. Divx will simply sit in the middle, syphoning money from the flow, and returning nothing. I find this distastefull.

  5. As an electrical engineer and programmer, I am interested in the design of electronic systems. The Divx system is a poor design, filled with decisions made by lawyers and marketteers, not engineers. It is an embarassment to the electronics industry.

related sites

Pro-Divx: This one seems to be a joke. Anti-Divx: DVD



Last changed 22 Dec 1998