The DivX Story: From Downloading ‘The Matrix’ to Watching it on All Three Screens

DivX is a codec that packs large video files into a smaller size. It’s also the San Diego company that has commercialized the technology.

CEO Kevin Hell talks of DivX moving towards “any online content on any device” as the next step in the evolution of consumer media, and “video freedom”, which means you will be able to seamlessly move a video from one screen to another, and watch it from all “three screens in our lives.” That means the computer screen in the office, the TV screen and video consoles in the living room and on the screens of cell phones and mobile devices anywhere. DivX’s Korean partners, Samsung and LG, are already making this inter-operability between their consumer products an asset. “There’s a great future in being able to move video from one device to another,” Hell says.

It started a little differently—with Wachowski Brothers’ and Keanu Reeves’ Hollywood megahit “The Matrix” (1999). A hacker nicknamed Gej reverse-engineered Microsoft’s version of MPEG-4, a standard video packaging system, to compress video files to more manageable sizes. Gej made a breakthrough that made it possible to download a whole movie in a few hours. The hacker called his software codec “DivX;)” (distinguishing it from an earlier version of DivX) and made it available on the Internet for free.

In San Diego, executive Jordan Greenhall used DivX to download a copy of “The Matrix.” He was so inspired he made a concerted effort to contact Gej, who turned out to be Jérome Rota in France, now 36-year old former graphic designer. (Hell replaced Greenhall as DivX CEO in mid-2007, and Greenhall resigned from the company’s board later that year. Jerome Rota continues to serve on the company’s board of directors.)

With the extremely handy free codec software they formed DivX in San Diego.

For a moment, the movie industry thought they had arrived in the same untenable situation as the music industry with and MP3 file sharing—their products would be downloaded without permission and distributed freely throughout the net. And it actually was through Napster that DivX became really popular. But DivX quickly turned away from digital piracy.

Kevin Hell

Kevin Hell

“We were associated with that, to some degree, but we were very careful not to support piracy in any way. We wanted to show that we were trying to build a world where you could download high-quality premium content and if it was a good enough experience people would pay for the content instead of doing something illegal,” CEO Hell says.

That was 10 short years ago. Now Warner Brothers has a deal with DivX to license its movies to DivX-certified devices, and a similar service is to be launched with Sony Pictures. “They recognize and appreciate the support we’re giving to digital rights management. And that’s why we’re able to get deals done,” says Hell.

DivX, Inc. (NASDAQ:DIVX) got initial funds from Zone Ventures of Los Angeles, CA, and from Tim Draper and several other investors from the Draper Fisher Jurvetson venture capital family. In 2006 DivX raised over $108 million with their IPO, and the company now has over 300 employees. In 2008, the DivX web player was launched 1.4 billion times. There are more than 600 DivX-certified digital television models, more than 200 DivX-certified Blu-ray player models, and more than 30 DivX-certified mobile phone models.

DivX makes money licensing its technologies to the manufacturers of those consumer electronic devices. CEO Hell says they are the standard for high-quality file-based videos on the Internet and he even calls his company the “800-pound gorilla.”

Still, DivX is a better-known brand outside the U.S. “I think there are some countries that seem to be much more in touch with digital media consumers than we are here in United States, and there’s also different consumer behavior,” says Hell.

“We are not really competing with anybody but ourselves right now. It’s about ‘Do I want to have access to content, or not?’ There’s no competition, because there’s no alternative. Either you have access to three billion videos or you don’t. I don’t see any competitors in our current model. But obviously there would be a competitive risk, when we move into a more connected world, when more and more content becomes available.”

But then, that’s why they are not in the pirate business, but trying instead to anticipate the next step in the evolution of consumer media.

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One response to “The DivX Story: From Downloading ‘The Matrix’ to Watching it on All Three Screens”

  1. Piracy is an easily defeated problem. If music and movie companies released their product with profit margins less than 500% a CD, DVD or Blue Ray disc would be affordable. In Australia a music CD at $30 and a DVD at $40 is too expensive. Companies could drop their price to $10 per item and “bang” three quarters of the pirate’s market will gladly buy the legitimate versions. Good on DivX. Perhaps online distribution will reduce the cost of entertainment to a tolerable level. Somehow I’m skeptical though!!