Circuit City Stores Inc. has decided to halt its pay-per-view Divx videodisc venture, yielding to market support for digital versatile discs.
The Richmond, Va., firm is taking a $114 million after-tax charge for the fiscal first quarter.
The step, announced June 16, affects replicators and packagers, along with consumers and Circuit City's retail operations.
The move immediately boosted Circuit City's stock price.
``Divx was an important customer of ours,'' said Richard Eisenstadt, treasury manager for replicator Nimbus CD International Inc. of Ruckersville, Va.
``We are disappointed with the Divx scenario as it has played out now,'' but the loss does not ``materially affect our business,'' Eisenstadt said in a telephone interview. ``We also manufacture DVDs.''
Nimbus is a unit of Technicolor's optical disc division.
Other Divx replicators have included Panasonic Disc Services Corp. of Torrance, Calif., and Pioneer Video Manufacturing Inc. of Carson, Calif.
Eisenstadt said the replication of Divx discs and DVDs is identical except for an additional step to serialize each Divx disc.
Divx was ``meant to be complementary and not take business from DVD,'' Eisenstadt said.
``We looked at it as another DVD product that was out there giving different options to the consumer,'' said Charles Van Horn, executive vice president of the International Recording Media Association in Princeton, N.J.
Circuit City and the Los Angeles law firm Ziffren, Brittenham, Branca & Fischer formed the venture Digital Video Express LP of Herndon, Va., and for three years attempted to gain movie-studio and retailer support for the DVD derivative.
Typically, a user purchased a Divx-compatible DVD player and bought movie discs for about $4 for one play within 48 hours and $1.50-$4 for each additional play. Those machines also play standard DVDs.
The limited partnership will enable registered Divx customers to view discs during a two-year phaseout period and will make a cash rebate of $100 to persons buying a Divx-enhanced player before the announcement date.