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Site created 12/15/97.

page added: 4/30/98

Stacking the Deck:
Divx Preparations in Richmond, VA

I was contacted today by someone in the electronics industry, a field engineering manager named Stephan. As a matter of course, in his position, Stephan routinely travels all over the Southeast. Over the last few days, he's found himself in Richmond, VA... which we all know is one of the two upcoming test markets for Divx. Stephan, being an ardent supporter of open DVD, decided to visit the Circuit City stores in the area, to see what preparations were being made for the launch of Divx. What he found was interesting indeed - so much so, that he was compelled to contact me as soon as he returned from his trip.

There are three Circuit City stores in the Richmond, VA area: a small one in the inner city (which was the chain's very first store), one on the west side, and a newer, full-sized store on the south side.

Stephan visited the south side store first. What he found, was that employees were tearing down much of the shelving area that had previously been devoted to VHS tape product, to make room for DVD and Divx discs. He saw a 25ft long rack (40 rows long and 5 high) filled on one side with open DVDs. Sounds good right? Well there were TWO empty shelves nearby, of the same size, which employees told him will soon be filled with Divx discs. In other words, the store will be devoting TWICE as much floor space to Divx as to DVD. Large signs announcing "Divx - Coming Soon" were also in evidence.

The clerks were quite excited about Divx. "We think it's gonna be pretty big." But as Stephan quickly discovered, aside from the marketing hype, these employees knew little about it! Stephan made his position on Divx known. "I don't support it," he told them. They were surprised at this, and asked to know why. Stephan proceeded to explain that the player will require a modem, that the discs will only include pan-and-scan, that they'll have no extras, and that if people choose not to keep them, they'll be an environmental hazard... all the familiar arguments. The employees were pretty surprised. In fact, they began to remark that Divx didn't sound so good after all. They were shocked to hear that Divx discs would lack the features of DVD. "We don't understand this Divx too much," they finally admitted.

Stephan's visits to the other stores were much the same. Both were just beginning to make shelf space available for DVD and Divx discs. All the signs were in place. And when Stephan asked employees at the west side store about all the open DVDs that had just been placed on the floor, he was told that the store had had the open DVD product in their back room for months... but they weren't allowed to put it on the floor until the Divx launch was closer! And after hearing Stephan's information about Divx and its features (vs. DVD), employees at these two stores began to voice the same opinions that clerks at the first store had. In fact, many remarked that they would now postpone purchasing either DVD or Divx, until the 'shooting was over'!

During his visit, Stephan also learned a few other interesting pieces of information. The employees he spoke with, all indicated that they'll be receiving training on Divx on May 18th - training specifically directed at how to sell Divx over DVD. Discs and players should begin arriving around the 15th. Stephan also heard that Sears was being courted as another Divx retailer, but that talks weren't going well.

Stephan was particularly concerned at the news that no other major retailer in the city is currently selling DVD, although there may be a few smaller stores doing so. There are apparently no Media Play or Best Buy stores in the area. Only Blockbuster is renting a few discs. And most consumers in the area have no idea what DVD is. All of which means that the deck is stacked in Divx's favor in Richmond. There's no competition for Divx. They'll easily be able to capture 20% of the market - all they have to do is encourage 20% of the customers in their three Circuit City stores to purchase Divx over DVD. And then, Divx will almost certainly be able to crow about the success of the test run!

This is disturbing news, of course, but hardly surprising. After relating this information to me, Stephan asked if Warner or the other supporters of open DVD have any plans to advertise in the test markets. "Who is going to educate these consumers, so they won't be fooled by Divx sales rhetoric?" A good question indeed...