Questioning Technology: Home Video

If four major Hollywood movie studios get their way, the eye of Big Brother will soon be focused on their home video customers. In fact, the next generation home video player is being built as a surveillance machine, complete with computer modem that dials into a central computer center in the wee hours of the night to report the owner's viewing patterns.It's all part of Divx, a newly-announced partnership between Circuit City Stores, Inc. and a prominent Los Angeles entertainment law firm. Divx adds military-grade copy protection to the existing DVD (Digital Versatile Disc) home video standard, while shutting out playback capability on the approximately 400,000 DVD players that have already been sold.Essentially, Divx is a pay-per-view version of DVD. For about $5, a customer can purchase a specially-encrypted Divx disc that allows viewing for 48 hours from the time the "play" button is pushed on a Divx-equipped DVD player. After that, the owner of the disc must pay for subsequent viewings.Payment is made to Divx through an account set up with a credit card at the time of the purchase of the Divx-enabled DVD player. The player, equipped with an internal modem, is connected via the user's telephone line to the Divx computer center. During the night hours, Divx communicates with the player to determine the customer's usage of Divx discs and an invoice is generated.Disney, Paramount, Universal and DreamWorks have agreed to provide movie titles for release on Divx discs, and Zenith, Thomson (RCA and ProScan brands) and Matsushita Electronic (Panasonic) have agreed to manufacture new DVD players with Divx capability. The new format is scheduled for national launch in the summer of 1998.Divx players will cost about $100 more than standard DVD players and will play all existing DVD discs. Standard DVD players, however, will not play Divx discs and there will be no way to upgrade them to do so.Though Divx attempted to portray its new system as an "enhancement" -- not a threat -- to the existing DVD technology, reaction from DVD supporters was fast and furious.Divx threatens a new home video format war, said Jeffrey Eves, president of the Video Software Dealers Association in Encino, CA. "We are at the early stages of what appears to be a successful introduction of DVD and along comes Divx," said Eves. "If Divx is able to get any kind of a foothold in the market, I think the reaction is likely to be that consumers and retailers will simply stand on the sidelines and wait until the format war is over."Eves said Divx offers nothing but higher cost to home video customers and threatens video rental stores, since Divx discs can be sold by any retailer and don't have to be returned. "You can buy a Divx disc for about five dollars or you can go to a video store and rent a DVD disc for an average price of $2.75," said Eves.Divx is being taken seriously because of its support by four major motion picture studios. If those key studios choose to release their product only in the Divx format, current DVD player owners will be left with machines that cannot play a significant number of new video releases.The Divx technology is attractive to the studios because it addresses their concern over motion picture piracy. It offers multiple layers of copy protection including individual serialization of players and discs, triple military-grade encryption, watermarking and analog copy protection.To the hundreds of thousands of early adopters who have already bought DVD players, the message from Richard L. Sharp, chairman and CEO of Circuit City Stores, hit a sour note. "Early adopters takes some risk," said Sharp. "It is a risk that everyone takes in the high technology marketplace when they buy something."Current DVD players, promoted for months to home video enthusiasts as an industry standard, cannot be upgraded to Divx. "Divx must be integrated at the factory to achieve our security objectives," said Sharp. "It's regrettable but unavoidable."Sharp said Circuit City has signs in its stores advising shoppers which studios are supporting the DVD standard and will upgrade those signs to include information about Divx. He contends those signs are all a potential buyer needs to have "full knowledge" about the format. "The consumer, we hope, will make an educated decision," he said.However, when asked if Circuit City employees will advise customers in the coming months about Divx when they consider the purchase of a conventional DVD player, he said that would happen only if the customer specifically asks the sales person in the store. "We will sign the store and if they ask we will tell them what Divx is," Sharp said.The privacy issue is another unknown factor with Divx. "Some people will be cautious about the notion that a central location dials into your telephone in the middle of the night and scans your machine to find out what you've been watching in the last 48 hours and then sends you a bill for it," said Eves."I'm sure some people will think that Big Brother is watching," said Dave Lukas, president of Dave's Video, a DVD and laser disc rental store in Studio City, CA.Divx contends that the information of its customers will be private, but with current laws it's hard to stop a company from selling customer information to data marketing firms. One only needs to look at America Online as an example.At Burbank's All Post, a leading DVD mastering facility, senior vp Brad Hunt worries that Divx will turn off potential customers to any new digital home video disc product."There is growing confusion in the consumer DVD market right now," Hunt said. "Divx is adding to that confusion. The Divx player is going to cost $100 more, it's going to require a phone hookup and an account. The question is will people really want to go to the trouble and expense of doing all these things just to be able to watch a movie."

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