Consumers Reject Dueling DVD Formats

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August 01, 1998 (6:47 AM EDT)

By Andy Patrizio,

Consumers don't seem too happy with the split in the DVD product line caused by Divx, the pay-per-view version of DVD developed by retailer Circuit City and an entertainment law firm, according to a market survey.

PolkVerity, a research firm focused on consumer electronics, found a high percentage of confused consumers who remember the VHS-Betamax battles of the early 1980s and don't wish to relive that mess again, nor do they want to pick a loser and be stuck with the '90s equivalent of the Betamax.

PolkVerity found there's actual "resentment" toward the consumer-electronics industry by non-DVD owners. "They feel strongly that a certain responsibility lies with the industry to present the best product option without creating confusion," said Bill Matthies, PolkVerity senior vice president, in a statement accompanying the survey. "In other words, they are unhappy about the introduction of the DVD-Divx competing formats."

But Divx doesn't deserve all of the blame, said Van Baker, director of consumer research for Dataquest, based in San Jose, Calif. "If you look at this whole thing from the beginning, it took them forever to come to a format and capacity decision on DVD," he said. "Then they weren't seeing a lot of success with the players. Then Divx came along. Now you have a camp in the industry that doesn't want Dolby Digital, they want DTS. It's one thing after another with this industry."

"If Divx did anything, it galvanized the DVD camp to get its act together."
-- Van Baker
Dataquest

DTS (Digital Theater Systems) is a competing, high-fidelity surround-sound format championed by director Stephen Spielberg, who is a part owner of the company that developed DTS. The other more-popular and less-expensive version of surround sound is Dolby Digital.

In the survey, 54 percent of respondents said they would be upset to learn that the industry had produced competing DVD formats and that some software would be incompatible -- which is exactly what happened. Also, 44 percent said that two competing DVD formats would make them less likely to purchase either one.

The other problem facing Divx is the nature of the format. Users can watch a movie as many times as they want for 48 hours after the first viewing. After that, they are free to throw out the disc or purchase another 48 hours from Digital Video Express for $3.25. This is done by hooking up the player to a phone line and using a credit card.

PolkVerity found 34 percent thought the Divx billing process through phone lines infringed on their privacy, and 33 percent also said that disposing of Divx discs, which are not recyclable, would cause pollution problems.

The survey said DVD rental availability would be crucial to DVD, which Baker agrees and credits Divx for propelling. "If Divx did anything, it galvanized the DVD camp to get its act together," he said. Video stores were initially reluctant to rent DVD for any one of several reasons.

But the emergence of Divx, which bypasses the video-rental store and is a direct threat to the rental market, has motivated the stores to consider DVD. Blockbuster Video and Hollywood Video, the two largest rental chains in the United States, have picked up DVD for national rollout. "So it could end up being that the best thing that ever happened to the DVD camp was Divx," said Baker.