Circuit City on Divx

CobraBoy (tbyars@earthlink.net)
Fri, 22 May 1998 20:14:50 -0700


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Content-Type: text/plain; charset="us-ascii"

Divx - The Best Way to Watch Movies At Home

It may be happening as you read this-construction Associates making
room for Divx displays on your sales floor; training Associates
providing demos of the Divx system; and Circuit City customers
asking, "are the Divx Player here yet?" To be sure, the
Divx players are coming. And Divx discs too. It starts in San
Francisco and Richmond in May and around Labor Day, the Divx wave
will start cresting around the country.

Imagine...

Try to imagine the kind of home video system you would design for
yourself if you could. It would offer:

* The quality of DVD digital picture and sound
* The freedom of no returns and no late fees
* The availability of hot feature titles, all the time
* The flexibility of starting the viewing period when you want
* The convenience of an affordable home video collection.

And it would do it all for about the price of a videotape rental.
That's Divx! Quality and convenience. Freedom and flexibility.
Affordability and title availability. The frustrations with the old
video rental system are now a thing of the past-something to tell
your grandkids about some day.

How does Divx Work?

Buying Your Player:

Divx begins with the purchase of a Divx-enhanced DVD player.
Zenith-Inteq models will be available this summer, and the national
roll will begin with RCA and Panasonic player later in the year. The
players will carry a suggested retail price of $499. Divx is not
starting a format battle. Divx is a feature. All Divx-enhanced DVD
players start as fully-functioning DVD players and are capable of
playing all basic DVD discs.

Setting Up Your Player:

The player plugs easily into the back of your television and
connects to a convenient phone jack. After your player is plugged
in, you make a toll-free call to the Divx Customer Satisfaction
Center to register it. Part of registration includes providing a
major credit card or debit card number. Any future charges you incur
will be charged to that card. The call takes about five minutes, and
then you are ready to start watching your favorite home movies!

Buying Divx Discs:

Divx movie discs look like music CDs and come in durable, jewel
case-sized packages. For a suggested retail price of about $4.50,
not much more than the cost of a VHS tape rental, you can buy one of
your favorite movies on a Divx disc-including the most recent
releases-from Disney, Paramount, Universal, Twentieth Century Fox,
MGM and DreamWorks. Divx discs are yours to keep, so they never have
to be returned. That means no late fees and no late-night return
trips to the video store. And because Divx will make enough discs
available to satisfy demand, you will no longer find the store out
of the hot movie title you most wanted to see. By national roll out,
approximately 150 Divx titles will be available. That number will
grow to 400 by the end of the year.

Playing Discs- The First Time:

The purchase price of a Divx disc includes a two-day viewing period.
But unlike traditional videotape rentals, the viewing period begins
not when you leave the store, but only when you insert the Divx disc
into your player for the first time and press play. Your rental
period may start on the day you bought your discs. It may start the
next week, or even months later. With Divx, you have all of the
features and flexibility you have always enjoyed with
videotape-rewind, fast-forward, pause. Unlike pay-per-view, you can
start the movie, fall asleep and start it again the next day, and
you can watch it as many times as you like within that 48-hour
window. And because Divx is a feature of DVD, you will also enjoy
the highest-quality digital picture and sound as well as other DVD
benefits, like no rewinding and jumping to different parts of the
program (as you can with CDs).

Playing Discs- The Second Time:

If you wish, Divx discs can be played again and again. Additional
two- day viewing period can be purchased by following the on-screen
prompts. The charge for a subsequent viewing period is about $3.25.
This price will be charged to your card and will show up on your
statement during the next billing cycle. You can review your account
through your Divx player. If you don't think you'll want to watch a
particular disc again, you might consider giving it to a friend or
trading it for another title. The viewing charge for anyone else
will also be $3.25, almost one-third less than the retail cost.

Converting Discs to Unlimited Play:

You and your family (particularly your kids) undoubtedly will enjoy
some movies so much that you'll want to watch them many times. It
would make sense to convert these discs to the unlimited play
format. Converting these discs to DivxSilver, as they are called
costs about $10 to $15, depending on the movie and how long it has
been available on video. To convert a disc to DivxSilver, you simply
follow the on-screen instructions. DivxSilver discs can be viewed as
unlimited number of times without charge to any Divx player
registered to your account. So, if you have Divx players in your
family room, bedroom, and at your vacation home, you can play your
DivxSilver discs on those players for free. For some titles, you may
also purchase DivxGold discs (for about $20), which allow for
unlimited free play on any Divx player.

Billing:

The phone line That's connected to your Divx player is used to
transmit transaction information to the Divx billing center. The
player calls the center, toll-free, once or twice a month during
off-peak hours (usually after midnight) to send a record of charges
that you may have incurred, such as the purchase of additional
viewing periods or the conversion of a disc to DivxSilver. Should
you need to use the phone during one of these transaction calls, the
player immediately hangs up and calls again later. The player never
interferes with outgoing or incoming calls. While the player's phone
line never has to be plugged in to play a disc, the preference is
for players to be connected to the phone line at all times to
facilitate the necessary exchange of information. The entire call
takes about 30 seconds.

Mail and Specials:

In addition to sending billing information every month, Divx players
also receive information from the Divx billing center. Using the
player's built-in menu, you can navigate to your own mailbox where
you'll find the latest Divx news and information about Divx
specials, such as discounts on DivxSilver conversions or extended
viewing periods. You will also be kept up to date on title
availability and any new Divx retailer in your area. And if you
prefer to do your shopping on-line, you can also order Divx discs
through the Divx website at www.divx.com.

Building A Video Library:

Divx is the most convenient system ever invented for watching
feature movies at home. In addition to unprecedented convenience,
Divx enable you to simply and economically build an at-home movie
library that has all the quality and resonance of DVD. Divx players
can play not only your favorite feature films on affordable Divx
discs, but all basic DVD titles as well.

Let the Revolution Begin...

What the microwave oven did for the kitchen-no less than a
revolution in time savings-Divx promises to do for the family room.
It will liberate us from the shackles of round-trip rentals and free
us forever from late fees. It will enhance our home theater
experience, delivering the awesome power of digital picture and
sound. And it will give us the flexibility to watch what we want,
when we want. This is an exciting time for Circuit city and our
Associates, as we are poised to change forever the way people watch
movies at home.

------------------

I've got another interesting piece of Divx information for you. The
following is an exert from Circuit City's financial report for FY98.
It reveals a bit of fact about just how much Circuit City has
committed to Divx, and how much they have pledged to pay the studios
for their Divx support:

--snip--

Under Section 13:

Commitments and Contingent Liabilities

(A) Investment in Divx: In May 1995, the Company agreed to invest
$30.0 million in Divx, a partnership that has developed and will
market a new home digital video system. That commitment was
increased to $130 million in September 1997. The Company holds
approximately 66 percent of the partnership and allocates investment
in Divx to the Circuit City Group. As of February 28, 1998, the
Company has funded approximately $86.8 million of its commitment, of
which $51.9 million has been expensed ($31.8 million was expensed in
fiscal year 1998, $11.4 million in fiscal 1997, and $8.7 million in
fiscal 1996 and prior).

(B) Licensing Agreements: Divx has entered in to licensing
agreements with motion picture distributors for use of their full
length films for the Divx system. The Company guarantees Divx's
performance under these commitments. The licensing fees are based on
varying percentages of consumer viewing and wholesale receipts and
require minimum distributor compensation commencing from the
operational date of each agreement through the following three to
five years. This compensation is contingent upon shipment of the
first Divx disc, currently expected to occur in May 1998. At that
time the minimum compensation from Divx to the studios is $112.0
million ($11.00 million in fiscal 1999, $26 million in fiscal 2000,
$32.0 million in fiscal 2001, $20.5 million in fiscal 2002, $14.5
million in fiscal 2003, and $8.0 million is fiscal 2004).

--unsnip--

--

Go sell crazy somewhere else, we're full up here. ...Nicholson

<> tbyars@earthlink.net <> --============_-1316229199==_ma============ Content-Type: text/enriched; charset="us-ascii"

<color><param>0000,00D7,0000</param> Divx - The Best Way to Watch Movies At Home

It may be happening as you read this-construction Associates making

room for Divx displays on your sales floor; training Associates

providing demos of the Divx system; and Circuit City customers

asking, &quot;are the Divx Player here yet?&quot; To be sure, the

Divx players are coming. And Divx discs too. It starts in San

Francisco and Richmond in May and around Labor Day, the Divx wave

will start cresting around the country.

Imagine...

Try to imagine the kind of home video system you would design for

yourself if you could. It would offer:

* The quality of DVD digital picture and sound

* The freedom of no returns and no late fees

* The availability of hot feature titles, all the time

* The flexibility of starting the viewing period when you want

* The convenience of an affordable home video collection.

And it would do it all for about the price of a videotape rental.

That's Divx! Quality and convenience. Freedom and flexibility.

Affordability and title availability. The frustrations with the old

video rental system are now a thing of the past-something to tell

your grandkids about some day.

How does Divx Work?

Buying Your Player:

Divx begins with the purchase of a Divx-enhanced DVD player.

Zenith-Inteq models will be available this summer, and the national

roll will begin with RCA and Panasonic player later in the year. The

players will carry a suggested retail price of $499. Divx is not

starting a format battle. Divx is a feature. All Divx-enhanced DVD

players start as fully-functioning DVD players and are capable of

playing all basic DVD discs.

Setting Up Your Player:

The player plugs easily into the back of your television and

connects to a convenient phone jack. After your player is plugged

in, you make a toll-free call to the Divx Customer Satisfaction

Center to register it. Part of registration includes providing a

major credit card or debit card number. Any future charges you incur

will be charged to that card. The call takes about five minutes, and

then you are ready to start watching your favorite home movies!

Buying Divx Discs:

Divx movie discs look like music CDs and come in durable, jewel

case-sized packages. For a suggested retail price of about $4.50,

not much more than the cost of a VHS tape rental, you can buy one of

your favorite movies on a Divx disc-including the most recent

releases-from <bold>Disney, Paramount, Universal, Twentieth Century Fox,

MGM and DreamWorks</bold>. Divx discs are yours to keep, so they never have

to be returned. That means no late fees and no late-night return

trips to the video store. And because Divx will make enough discs

available to satisfy demand, you will no longer find the store out

of the hot movie title you most wanted to see. By national roll out,

approximately 150 Divx titles will be available. That number will

grow to 400 by the end of the year.

Playing Discs- The First Time:

The purchase price of a Divx disc includes a two-day viewing period.

But unlike traditional videotape rentals, the viewing period begins

not when you leave the store, but only when you insert the Divx disc

into your player for the first time and press play. Your rental

period may start on the day you bought your discs. It may start the

next week, or even months later. With Divx, you have all of the

features and flexibility you have always enjoyed with

videotape-rewind, fast-forward, pause. Unlike pay-per-view, you can

start the movie, fall asleep and start it again the next day, and

you can watch it as many times as you like within that 48-hour

window. And because Divx is a feature of DVD, you will also enjoy

the highest-quality digital picture and sound as well as other DVD

benefits, like no rewinding and jumping to different parts of the

program (as you can with CDs).

Playing Discs- The Second Time:

If you wish, Divx discs can be played again and again. Additional

two- day viewing period can be purchased by following the on-screen

prompts. The charge for a subsequent viewing period is about $3.25.

This price will be charged to your card and will show up on your

statement during the next billing cycle. You can review your account

through your Divx player. If you don't think you'll want to watch a

particular disc again, you might consider giving it to a friend or

trading it for another title. The viewing charge for anyone else

will also be $3.25, almost one-third less than the retail cost.

Converting Discs to Unlimited Play:

You and your family (particularly your kids) undoubtedly will enjoy

some movies so much that you'll want to watch them many times. It

would make sense to convert these discs to the unlimited play

format. Converting these discs to DivxSilver, as they are called

costs about $10 to $15, depending on the movie and how long it has

been available on video. To convert a disc to DivxSilver, you simply

follow the on-screen instructions. DivxSilver discs can be viewed as

unlimited number of times without charge to any Divx player

registered to your account. So, if you have Divx players in your

family room, bedroom, and at your vacation home, you can play your

DivxSilver discs on those players for free. For some titles, you may

also purchase DivxGold discs (for about $20), which allow for

unlimited free play on any Divx player.

Billing:

The phone line That's connected to your Divx player is used to

transmit transaction information to the Divx billing center. The

player calls the center, toll-free, once or twice a month during

off-peak hours (usually after midnight) to send a record of charges

that you may have incurred, such as the purchase of additional

viewing periods or the conversion of a disc to DivxSilver. Should

you need to use the phone during one of these transaction calls, the

player immediately hangs up and calls again later. The player never

interferes with outgoing or incoming calls. While the player's phone

line never has to be plugged in to play a disc, the preference is

for players to be connected to the phone line at all times to

facilitate the necessary exchange of information. The entire call

takes about 30 seconds.

Mail and Specials:

In addition to sending billing information every month, Divx players

also receive information from the Divx billing center. Using the

player's built-in menu, you can navigate to your own mailbox where

you'll find the latest Divx news and information about Divx

specials, such as discounts on DivxSilver conversions or extended

viewing periods. You will also be kept up to date on title

availability and any new Divx retailer in your area. And if you

prefer to do your shopping on-line, you can also order Divx discs

through the Divx website at www.divx.com.

Building A Video Library:

Divx is the most convenient system ever invented for watching

feature movies at home. In addition to unprecedented convenience,

Divx enable you to simply and economically build an at-home movie

library that has all the quality and resonance of DVD. Divx players

can play not only your favorite feature films on affordable Divx

discs, but all basic DVD titles as well.

Let the Revolution Begin...

What the microwave oven did for the kitchen-no less than a

revolution in time savings-Divx promises to do for the family room.

It will liberate us from the shackles of round-trip rentals and free

us forever from late fees. It will enhance our home theater

experience, delivering the awesome power of digital picture and

sound. And it will give us the flexibility to watch what we want,

when we want. This is an exciting time for Circuit city and our

Associates, as we are poised to change forever the way people watch

movies at home.

------------------

I've got another interesting piece of Divx information for you. The

following is an exert from Circuit City's financial report for FY98.

It reveals a bit of fact about just how much Circuit City has

committed to Divx, and how much they have pledged to pay the studios

for their Divx support:

--snip--

Under Section 13:

Commitments and Contingent Liabilities

(A) Investment in Divx: In May 1995, the Company agreed to invest

$30.0 million in Divx, a partnership that has developed and will

market a new home digital video system. That commitment was

increased to $130 million in September 1997. The Company holds

approximately 66 percent of the partnership and allocates investment

in Divx to the Circuit City Group. As of February 28, 1998, the

Company has funded approximately $86.8 million of its commitment, of

which $51.9 million has been expensed ($31.8 million was expensed in

fiscal year 1998, $11.4 million in fiscal 1997, and $8.7 million in

fiscal 1996 and prior).

(B) Licensing Agreements: Divx has entered in to licensing

agreements with motion picture distributors for use of their full

length films for the Divx system. The Company guarantees Divx's

performance under these commitments. The licensing fees are based on

varying percentages of consumer viewing and wholesale receipts and

require minimum distributor compensation commencing from the

operational date of each agreement through the following three to

five years. This compensation is contingent upon shipment of the

first Divx disc, currently expected to occur in May 1998. At that

time the minimum compensation from Divx to the studios is $112.0

million ($11.00 million in fiscal 1999, $26 million in fiscal 2000,

$32.0 million in fiscal 2001, $20.5 million in fiscal 2002, $14.5

million in fiscal 2003, and $8.0 million is fiscal 2004).

--unsnip-- </color>

--

Go sell crazy somewhere else,

we're full up here. ...Nicholson

<<> tbyars@earthlink.net <<>

--============_-1316229199==_ma============--