Circuit City Plans Disposable Videos

Everybody knows the annoyance of planning a night at home watching the latest hot movie - only to find that someone snatched up the last copy moments ahead of you.

And who hasn't known the frustration of racing to return a tape in time to avoid the late fee, only to find the store locking its doors?

On Monday, the nation's largest retailer of brand-name consumer electronics will introduce a single-use video disk as a solution to those problems.

Circuit City is test-marketing Divx, disks movie fans can buy for $4.49 each, view once, then toss away. Because the disks are bought and not rented, retailers could stock far more copies of in-demand flicks than video rental stores do now.

"We are presenting this to the consumer as a better way to rent a video product," said Richard L. Sharp, Circuit City's chairman and CEO.

The disks will be sold in Richmond, Va., and San Francisco until the fall, when Circuit City plans to launch them nationwide.

Digital video disks, or DVDs, are high-capacity storage devices that look like CDs but can hold about seven times more data, or the equivalent of a full-length movie. Their picture quality is much higher than standard video tapes.

Ordinary DVDs sell for $25 to $30 and buyers can play them as often as they want. Divx is for people who aren't sure they want to shell out the money to own the movie but who still want to see it.

Unlike a video rental, where you have to pick up the tape the evening you plan to watch the film, Divx allows people to buy a movie days or months before watching it. However, once a disk is inserted into a Divx player, it will only work for 48 hours.

To see the film again after the 48 hours have expired, a user has to pay an additional $3.25 by punching a code on a remote control. Divx players will be hooked up by phone line to a central billing computer, which will keep track of additional charges. The computer will be run by Digital Video Express LP, a joint venture between Circuit City and a Los Angeles entertainment-law firm, Ziffren, Brittenham, Branca & Fischer.

Viewers who decide to buy the movie can pay $10 to $20 to permanently unscramble the disks. That would allow the disk's owner to watch it as often as he pleases, but it would play only on his player. To watch the disk on another Divx player would require an extra payment of $3.25.

Zenith is launching a Divx player Monday which will cost $499, about $100 more than a similar non-Divx playing model.

About 40 movie titles will be available on Monday, and Circuit City is hoping for an additional 50 titles a month. Several large studios, including Disney and Paramount, have promised they will release their films on Divx the same day they come out on video, said Josh Dare, a spokesman for Digital Video Express.

Circuit City plans to spend $100 million to advertise Divx over the next year, Dare said.

"We don't expect to break een this year or next year," he said. "We're hoping that within five years we will be able to capture 20 percent of the video rental market."

While the idea is innovative, it will have to overcome some hurdles before being widely accepted, said Richard Doherty, director of research of The Envisioneering Group, a Seaford, N.Y. technology consulting firm.

Divx disks will not work on existing DVD players, although Divx players will be able to show DVD disks. The difference between the two types of disks could confuse consumers, Doherty said.

The Divx disk pricing policy could also annoy people who are used to owning something once they buy it.

"When a person buys an audio or video cassette, they expect to play it anywhere," Doherty said. "Consumers aren't used to that sort of thing."

Circuit City is also going to face competition from Blockbuster and Warner Brothers, both of whom are renting standard DVDs the same way video cassettes are rented.

Also, a similar scheme to sell single-use video tapes several years ago was a failure, Doherty said.

But Circuit City is confident Divx will succeed.

"Circuit City has sold more audio and video equipment than anybody on earth in the last 16 years," Sharp said. "It doesn't mean we are infallible, but it does give us an expert opinion."

Written by Jan Cienski