Revenge of the "early adopters"

Angry DVD owners didn't like Circuit City's new video-rental technology -- so they fought back on the Net.

By Andrew Leonard
Published April 29, 1998 7:00PM (EDT)

Talk about your no-lose protest propositions: Wednesday, April 29, is, according to a bevy of Web sites, "International No-Divx Day." But Divx -- a home entertainment technology system designed to replace video store rentals with pay-per-view -- doesn't even exist yet. That makes it fairly easy to shun, even if you are a typical "early adopter" -- the kind of person who absolutely, positively must have the newest whiz-bang gadget before anyone else.

But even if Divx were already available -- even if you could buy a special Divx player, hook it up to a phone line, purchase an encrypted digital video movie disc and pay the fee for watching your chosen movie, right now -- the early adopters would still spit in disgust and festoon their Web pages with "No Divx" buttons. Early adopters hate Divx more than anyone else: They see it as a rival to their own digital video technology of choice, DVD (basically, a compact disc that plays video). And they have trumpeted their opposition across the Net ever since consumer electronics retailer Circuit City first announced Divx last September.

Circuit City says that it isn't particularly interested in the early adopter market. The company is aiming for the mainstream, at the millions of video renters sick and tired of paying late fees because they've forgotten to return their VHS tapes on time. But in today's information climate, consumer entertainment technology companies ignore avant-geek concerns at their peril. Early adopters have always excelled at spreading word of mouth and generating grass-roots excitement. And online communication amplifies word-of-mouth exponentially. If Divx crashes and burns, as many analysts predict, the Net will have helped shoot it down.

"Let's stand together and fight Divx," wrote one poster to the newsgroup "Our efforts on our own have not led to success so far so it's time to unite our efforts. If a considerable number of people join the Divx boycott it could work. But we have to act now -- before it's too late. I don't want to wake up one day and find out that my favorite music CD is Divx encoded and that my favorite computer software contains the Divx virus."


"I'm trying to get enough controversy stirred up where somebody at the studios somewhere will go, 'This is like the abortion issue; let's just not to do this,'" says Tim Kraemer, webmaster of the Tech Zone and the original organizer of International No-Divx Day. "I'm just encouraging everyone to do everything they can to actually stop this before it happens. Historically, consumers have always had a 'we're going to take it' attitude. But we've got the Internet now. It's easy to protest. We don't have to type out letters and send out mail. The Internet gives you a place to scream and yell where people can hear you really quickly."

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Not since the debut of New Coke has a product launch met with as much universal derision as Divx. There's no shortage of explanations.

First, and most important, Circuit City announced Divx just as the long awaited roll-out of a competing digital technology, DVD, finally began to materialize. For many home entertainment fans, DVD -- an acronym for Digital Versatile Disc, or Digital Video Disc, whichever you prefer -- promised a new age of movie owning and viewing pleasure. The format, theoretically, transcended the technological limitations of both videotape and laserdisc, as well as offering many new goodies, such as wide-screen viewing options.

Then came Divx -- an "enhancement" to DVD that introduced a new business model to the world of video rental and sales. After consumers
buy a Divx disc (for a suggested retail price of $5) they
receive the right to watch it on their home Divx player (which needs a live modem connection to Divx billing headquarters) for an unlimited
number of times in the first 48 hours. You never have to return the disc -- but if you want to watch it again, you've got to pay extra each time.

Divx's arrival plunged the nascent DVD market into chaos. The first generation of DVD players won't play Divx discs, and a number of key studios, including Fox, Paramount and Dreamworks (encouraged by large cash payments from Circuit City), suddenly announced support for the Divx standard without making clear any plans to begin releases on DVD. (On Monday, Paramount announced it would support both formats.)

"The impressions of the people on the Internet started out extremely hostile," says Bill Hunt, editor of the Digital Bits, a Net-based DVD newsletter. Hunt, who participated in the first Circuit City conference call announcing the new technology, says that the transcript of the conference he posted on his Web site provoked "howls of anger."

"People who had DVD players saw Divx as a threat," says Hunt. "DVD had been billed as the next big convergence medium. People thought, hey, we've got one thing we can buy, and the price is coming down, and it's going to be here a long time, and there won't be a format war."

"Our Web site is popular with early adopters and they went bonkers," says David Elrich, a journalist who covers the consumer electronics business and contributes to a Web magazine that specializes in entertainment technology news. "We spent days just deleting foul posts from the forum. The vitriol was amazing. People just went ballistic."

"It was a colossal marketing blunder," says Elrich. "And what really irked the early adopters was the callousness of [Circuit City CEO] Richard Sharp at his initial press conference. It was almost like early adopters should expect to get burned and that's the risk."

Circuit City acknowledges that they missed the early-adopter boat.

"When we announced the product last September, that didn't really fit with the early DVD adopter period -- the person who is a videophile, who may have been a laserdisc collector, someone who is used to going out and buying and owning forever the movies that they want in the format they want," says Josh Dare, a spokesman for Divx. "And here comes this interloper that is against the very precepts that they are all about -- this is a rental type of a model, this is conditional access, you own the disc, but you don't own the right to view it any time. This is a foreign concept to anyone, and this is something new, and I think that there was a great fear that if Divx took hold that it would override and get rid of DVD. Part of our mission is to not only educate people, but reassure those early adopters that we have no intention of trying to corner the market on DVD."

But cornering the market is only part of the problem. The "conditional access" aspect of Divx is at least as inflammatory. Resentment against Divx isn't confined to geeks watching dismayed as the value of their new home entertainment systems instantly depreciates. The Divx proposal cuts sharply against the consumer grain: It threatens the sense of ownership that consumers feel for the videotapes or laserdiscs they had previously bought, or even rented. With Divx, you don't own anything -- even after you've paid for it.

Divx, in other words, appeared to be a greedy attempt to wrest power away from the individual and back to the corporation. Even as Circuit City stressed, repeatedly, that there would be purchase options for Divx discs -- lifetime viewing privileges for specific fees -- distrust still ran deep. The consumer had lost control.

"It forces the consumers to change the way they consume," says Hunt, the Digital Bits editor. "You can only play the movie in the way they let you play the movie. Consumers feel that if they shell out the money they want it to be theirs. The Divx model goes against every notion about how we consume goods in this country."

Not entirely. As Kraemer observes, the Divx model just applies the software business model -- where consumers technically do not own their software, but merely license it -- to home entertainment. Across the entertainment spectrum, the very idea of consumer ownership is under assault.

What's happening with Divx suggests that the Internet may help the consumer fight back -- by elevating word-of-mouth from the quaint status of over-the-fence gossip into a powerful market force. Early adopters just happen to be the kind of people most likely to set up Web pages and be active in Internet discussion forums -- they get extra leverage from the Net. Just try surfing the Web searching for information on Divx: Aside from the official Divx site, the Net swarms with anti-Divx hatred. It's hard to imagine a more effective disincentive to pulling out your credit card and buying a brand new piece of technology.

Rage has even transformed into direct action. Circuit City has announced that it will begin selling Divx players and discs in two test markets next month -- San Francisco and Richmond, Va. On the Net, anti-Divx activists are holding regular discussions of strategy and tactics. There are plans to boycott Circuit City. There are flyers outlining the case against Divx that can be downloaded from the Web, printed out and distributed. There's even talk of street protests, though that may be unrealistic. Sure, Americans take their consumption of entertainment commodities seriously, but will they be willing to march for their preferred format? Perhaps not.

But maybe they don't need to. Maybe all they really need to do is get the word out. In the case of Divx, they've already established an impregnable beachhead in the information war over home entertainment.

Even Circuit City now admits that they have no
chance of gaining the support of the cutting-edge geeks. "By and large," says Dare, "we're going to have to go after the mass market without that jump-start that the early adopters may have given us."

In today's hotly competitive market, that jump-start may prove irreplaceable.

"It's going to be a $100 million blood bath for Circuit City," says consumer-electronics journalist Elrich, who believes that the active opposition of early adopters, mobilized on the Net, has doomed Divx -- and may doom other products still unborn.

"The impact of the Web has not reached the highest level of corporate America," says Elrich. "They simply don't understand this thing, and they don't get it. And this is particularly going to hurt them in the area of high technology. The Internet has given consumers empowerment that I think is still worrisome and scary to corporate executives. They don't know how to handle it -- who these people are, and what they are doing, and why they are so passionate."

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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