DivX followed their earnings report with a JP Morgan conference presentation. Having just undergone their quarterly confessional, I didn’t expect to hear any new information.
Luckily, I was rewarded midway through the Q&A session. JP Morgan analyst Paul Coster coyly probed Kevin Hell regarding DivX support on the Xbox 360. The question seemed to catch Hell off guard and, while his initial reaction was enthusiasm, there was something in his tone suggesting that Coster was on target.
Below is the exchange verbatim. However, to fully appreciate the awkwardness of the exchange, I suggest listening in at the 24 minute mark and determine for yourself if you hear a sense of urgency in Hell’s response.
Just a minor point here, but there was a recent Microsoft conference where I believe their media extender now incorporates the DivX codec on it, is that correct? Can you confirm that and does that mean we’re soon going to see Xboxes with DivX on them?
Yes! that, uh, we’re in discussions with Microsoft on that at this point in time, so I can’t go into any great detail on that. Um that is not a certified, that is not a certified or licensed product at this time.
At this point DivX CFO Dan Halvorson jumped in and quickly changed the subject.
It was only a brief exchange but, after pretty much giving up all hope of seeing DivX on the Xbox, I found the news to be very encouraging. When I originally read Microsoft would be supporting DivX on their media extenders but not on the 360, I took this as a sign that negotiations were over and that Microsoft didn’t want to pay licensing for the entire Xbox 360 population. In retrospect, Microsoft may have really been engaging in the subtle art of negotiation.
In thinking about the summer XviD/360 rumors, I wonder if Microsoft could have leaked this information to gain leverage in their discussions. An Xbox that supports XviD but not DivX, provides a less than optimal experience for consumers. Though, the downside would be far worse for DivX than Microsoft. Could Microsoft have been flexing their muscles in an attempt to get a better licensing deal with DivX? I don’t have the answers, but I do have advice for both companies:
DivX – I know that you have responsibilities to your shareholders but, as a fan, I urge you to engage in some fiscal irresponsibility and give in to whatever Microsoft is demanding. DivX support on the Xbox is one of the top requests from your community and would make a killer extension for your codec. Don’t make us hack into our Xbox to get at the DivX love. The platform would give you instant access to millions of television sets and would energize your entire community.
Microsoft – Have you looked at how much cash you have in your bank account? Why are you even playing this game of chicken? We should have had DivX support years ago. Offering XviD, but not DivX would be a huge hassle for your customers and isn’t worth the money you’d save on royalties. The publicity from adopting an open strategy would more then pay for your investment. Your strategy to treat media extenders differently from the 360 is an obstacle to mainstream adoption and one that should be abandoned. You should listen to consumers, even if it means overpaying DivX for certification. With a consistent extender strategy and DivX support on the Xbox 360, you could crush the PS3 and create a more compelling reason for people to adopt your Media Center technology.
It’s hard to say how negotiations will turn out, but I have a feeling that it won’t be waiting long to find out. The “fall update” is rumored to be taking place sometime in December and if it doesn’t include DivX support, it will likely mean that these discussions broke down. If it does include DivX support, it will be a huge win for DivX, for Microsoft and most important, for their customers.
Davis Freeberg is a technology enthusiast living in the Bay Area. He enjoys writing about movies, music, and the impact that digital technology is having on traditional media. Read more at Davis Freeberg’s Digital Connection.