Divx Presentation
June 8, 1998
Alain Dalva
Mauricio Endo
Shoichi Osawa
Greg Scheuffele
Agenda
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•
•
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What is Divx? - Alain
Critical Issues Grid - Mauricio
House of Quality - Shoichi
Bayesian Network - Greg
Positioning
• The affordable video disc
– pan-and-scan
• The convenient video disc
– no more late returns
• The smart video disc
– you own it yet you don’t
Company
• Digital Video Express L.P
– Circuit City Stores, Inc. (66%)
– Ziffren, Brittenham, Branca & Fischer (34%)
Competition
DVD
• Multimedia-rich format
– collector’s positioning
• Expensive
– $20-$25 sell-thru discs
– $400 - $1,000 players
– but prices are dropping
Competition (Cont’d)
DVD
• Moderate success
– 500K players sold in first year
– Penetration estimated at 2.5% by end 1999
– Over 1,000 titles available
• Expanding distribution
– 100 to 1,000 Blockbuster stores
– NetFlix
Consumers
Divx
• Low-involvement
• Rental Habit
• Price sensitive
DVD
• Collector
• Sell-thru Habit
• Gizmo-crazy
Product: Software
• Encryption feature
– co-developed by Nimbus and DVE
• Stripped-down, pan-and-scan version
• Disposable
• Upgradable to “Divx Silver”
Product: Hardware
• DVD Player with built-in modem
– additional phone line
• DTS audio decoder
• Compatible with DVD titles (but not the
other way around)
Price: Software
• $4.50 to unlock 48-hour viewing period
• $3.25 extra for additional viewing
• $12.50 extra to acquire title permanently
• Pros: less expensive than DVD
• Cons: incompatible with other Divx players
Price: Hardware
Divx expected to match low-end DVD within
2 years
Retail Price
$500
$450
Divx Player
$400
Low-end DVD
Player
$350
$300
$250
1998
1999
Year
2000
Promotion
• $100M first-year launch campaign
– TV, print, direct-mail
– Unnamed celebrity spokesperson
• “You have reached the point of no return”
Distribution
• Hardware
– Circuit City, The Good Guys
• Software
– Circuit City, The Good Guys
– Divx website
• Future expansion
– Video rental stores only
Launch
• Limited in San Francisco, CA and
Richmond, VA, today
• Nationwide in September
Title Catalog
• 50 titles in limited launch
• 100 titles by mid-summer
• 400 titles by year-end holidays
• DVE holds “day-and date” agreements for
1,500 titles
Title Catalog (Cont’d)
Month
Nov-98
Sep-98
Jul-98
May-98
Mar-98
Jan-98
Nov-97
Sep-97
Jul-97
DVD
Divx
May-97
1,600
1,400
1,200
1,000
800
600
400
200
-
Mar-97
Titles
Will Divx catch up with DVD?
Industry Players
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•
•
•
•
Hardware manufacturers
Studios (content providers)
Pre-mastering facilities
Replicators
Retailers
Hardware Manufacturers
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•
•
•
•
•
Zenith Electronics Corp
Thomson Consumer Electronics
Matsushita Electric Industrial Co.
JVC
Pioneer Electronic Corp
The Harman Consumer Group
Studios
Divx Only
Divx and DVD
DVD Only
Fox
Disney
Sony
Dreamworks
Universal
Warner Bros.
Paramount
MGM-UA
Industry Other
• Pre-mastering facilities
– Complete Post, Sunset Post
• Replicators
– Nimbus, Rainmaker, Panasonic Disc Services
• Retailers
– Circuit City, The Good Guys
Critical Issue - Company
Political
:Copyright
Behavioral
:No disk return
Recordability
Economic
:Price premium of $.50 - $1 over VHS
Cost effective licensing
Social
:Interactive system or movie theater
Technological
:Encryption
DVD superior quality picture/sound
Critical Issue - Business Ecosystem
Political
:Copyright, piracy by consumers
Behavioral
:Initial limited film selection on DVD and DIVX
Consumer ready for DVD/DIVX technology?
Economic
:Low penetration due to standard confusion
High cost for retailers due to no disk return
Social
:”Cocooning" going to be reversed?
Technological
:Can DIVX's encryption scheme be broken?
Critical Issue - Infrastructure
Political
:Copyright
Intellectual property protection worldwide
Behavioral
:”Throw away”- environmental threat?
Cable/satellite pay-per-view systems
Economic
obsolete
:Internet commerce - physical retail distribution
Social
interaction
:New forms of recreation emphasize personal
Technological
:Encryption and multimedia in internet, cable, PCs...
Must-have
Liner Satisfier
Delighter
Indifferent
Players
Consumers should make movie-viewing convenient
should have price similar to VHS
should offer wide variety of films
should be able to record movies
should support added media features
+
+
User Needs
++
+
+
--
Available licensing to all distributors
Available licensing to all manufacturers
Marketing launch campaign
No interactivity
No recordability
Rental / sell-thru dual purpose
Disposability
Disk capacity
Content availability (5 of 7 major studios)
Cost advantage
Per use tracking
$4.50 pricing point
DVD players <-//-> Divx discs
Divx players <-> DVD discs
Encryption
House of Quality: Consumers Needs
Product / Service Specifications
House of Quality:Retailer Needs
Available licensing to all distributors
Available licensing to all manufacturers
Marketing launch campaign
+
No interactivity
-
No recordability
Disk capacity
Content availability (5 of 7 major studios)
Cost advantage
Per use tracking
$4.50 pricing point
Rental / sell-thru dual purpose
Retailers
Disposability
Players
DVD players <-//-> Divx discs
Encryption
Must-have
Liner Satisfier
Delighter
Indifferent
Divx players <-> DVD discs
Product / Service Specifications
User Needs
should keep inventories low
should provide wide variety of content
should provide full range of players
should be backed by 'pull' marketing
should be equally available to all distributors
should be easy for sales force to explain
+
+
+
++
+
-
-
-
House of Quality:Studio Distributor Needs
Players
Available licensing to all distributors
Available licensing to all manufacturers
Marketing launch campaign
No interactivity
No recordability
Rental / sell-thru dual purpose
Disposability
Disk capacity
Content availability (5 of 7 major studios)
Cost advantage
Per use tracking
$4.50 pricing point
DVD players <-//-> Divx discs
Encryption
Must-have
Liner Satisfier
Delighter
Indifferent
Divx players <-> DVD discs
Product / Service Specifications
User Needs
Studio Distributors should provide piracy protection
should generate extra revenues from VHS replacement
should generate extra revenues by video mkt expansion
should be equally available to all distributors
should have low/flexible licensing fees
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+
++
+
+
++
+
Must-have
Liner Satisfier
Delighter
Indifferent
Players
Manufacturers
should have low/flexible licensing fees
should have low manufacturing costs
should have flexible operational implementation
+
+
User Needs
+
Available licensing to all distributors
Available licensing to all manufacturers
Marketing launch campaign
No interactivity
No recordability
Rental / sell-thru dual purpose
Disposability
Disk capacity
Content availability (5 of 7 major studios)
Cost advantage
Per use tracking
$4.50 pricing point
DVD players <-//-> Divx discs
Divx players <-> DVD discs
Encryption
House of Quality:Manufacturer Needs
Product / Service Specifications