DivXNetworks Sets Table With 'Full Meal' MPEG-4

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DivXNetworks Inc. believes it has prepared the right menu for service providers interested in a better and cheaper way to distribute Internet-protocol video content — and it's now trying to whet the appetites of both video-over-Internet providers and cable operators.

DivX's new Open Video System offers content providers what the San Diego-based company calls the "full-meal deal" — an MPEG-4 (Moving Picture Expert Group) video-delivery system for broadband-IP networks with the ability to encode, encrypt, add electronic-commerce hooks and oversee delivery to the end user. DivX also said the system will save in bandwidth and cost when compared to traditional MPEG-2 video delivery.

Like many other technology developers, DivXNetworks is a one-man band trying to drum up consumer buzz for its MPEG-4 based products in an industry long on rivals. But in addition to the hard economic times, it faces plenty of hurdles.

The Open Video System rounds out DivXNetworks' product line, which also includes an à la carte DivX codec for video conversion and a homegrown digital rights-management system. Since its October debut, a wave of independent film outfits have signed on to use the DivX Open Video System for Web movie distribution, including Strand Releasing and Vanguard Cinema, Vista Street Entertainment and Melano Filmworks.

Videomaker
magazine will use the video delivery system to offer instructional filmmaking clips, and Broadway Television Network — which provides pay-per-view Great White Way musicals to cable operators — cut a Web distribution deal using the DivX technology.

And Gaming software provider Blizzard Entertainment has licensed the video-compression technology to distribute cinematic trailers for its popular titles.

"We're in the unique position in that we are the bleeding edge of the bleeding edge, in the sense that we know that MPEG-4 is the future of video, and DivX is by far the leader in MPEG-4," said founder and CEO Jordan Greenhall. "We are just at the point where the rest of the world is starting to catch up with MPEG-4, and that has started to swamp us from a technical perspective."

LOOKING TO DIGITAL

Today's market for the Open Video System is essentially confined to smaller, independent video providers. In launching OVS now, DivXNetworks hoped to give the major Hollywood studios a working model for MPEG-4 delivery over the Internet.

Major studios are working on MPEG-4 projects, but they still haven't gelled their digital film-distribution strategies, according to Greenhall.

"MPEG-4 is even being demanded by the major studios because it is a nice, internationally recognized, adopted open standard, which is what they are very comfortable with," he said.

That said, the majors still aren't willing to close a deal. That's "more a matter of inertia and decision-making processes, more than anything else," said Greenhall.

The technology's big lure is cost savings. Depending on the network, an IP video-on-demand system using DivX MPEG-4 will only be one-third as expensive to operate as an MPEG-2 system, said Greenhall. It would run five times more efficiently.

But naysayers argued that the MPEG-4 video codec developed in 1998 is old news. Newer, proprietary codecs like Microsoft Corp.'s Windows Media outperform MPEG-4, they contend. Greenhall dismissed that argument, saying MPEG-4 codecs have kept pace.

Earlier this month, DivX released a new version of its MPEG-4 codec for real-time encoding and high-definition resolution video decoding. When used on systems powered by Intel Corp.'s Pentium 4 processor, the software-based codec can convert video 78 percent faster and produce full-screen, near-DVD quality digital video with up to seven times greater compression than MPEG-2 files, according to the company.

Much criticism of MPEG-4 has been driven by companies that have a vested interest in selling their proprietary codecs, Greenhall said.

"There's a very fundamental open standards-vs.-proprietary thing going on," Greenhall said. "And historically, open standards have almost universally beaten proprietary technologies, because no matter how good the technology is, or really, no matter how powerful a company is backing that technology, it's very difficult to compete with an entire industry."

Another early problem has been an association between DivX's MPEG-4 technology and pirate software used to crack encrypted DVDs and convert the video to MPEG-4 format. Greenhall pointed out that the codec was just the end point — the software was the offender.

"The content owners have actually made some pretty public statements that DivXNetworks is not a pirate technology — that DivXNetworks is not to blame for what is going on in the underground," Greenhall said. "With that really behind us, the pirate stigma had gone away completely."

TAPPING OTHER MARKETS

Studios and independent entertainment video producers represent only one-third of the market for DivXNetworks.

"You've also got all of the major cable operators, satellite operators and [local-exchange carriers] who could use our software to do video-on-demand kinds of video distribution," Greenhall said. "Then you have the entire panoply of consumer-electronics and hardware providers in multiple industries — not just entertainment — who can integrate our core technologies into what they are doing to provide video to their customers."

Though DivX may be courting cable clients, indications are that such MPEG-4-based products will primarily take hold in the IP world. There has been little indication that traditional cable and broadcasters are going to abandon MPEG-2 any time soon, according to Jupiter Research Inc. analyst Lydia Loizides.

"There is much more interest being generated from the non-MPEG 2 world," Loizodes said. "More people who are really trying to understand how they can push content for multichannel stuff that has been pushed over MPEG-2, but maybe we want to get it to the PC, or maybe we want to get it to handhelds or maybe we want to get it to alternative devices."

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