As Shift to Internet TV Accelerates, DivX CEO Positions Company to Offer ‘Any to Any’ Solution

9/15/09Follow @bvbigelow

San Diego’s DivX has been on something of a roll since June, when CEO Kevin Hell talked about the capability of someday moving television seamlessly from the living room TV screen to the computer screen and to the screens of wireless mobile devices.

The digital media company, which takes its name from the DivX codec standard, has been extending its reach further into consumer electronics, Internet video, and Internet Protocol TV (IPTV), which uses the Internet to deliver digital TV service. On one front, DivX is continuing to negotiate deals with consumer electronics manufacturers to incorporate its digital video compression technology in the latest HD televisions, Blu-ray disc players, and IPTV set top boxes. The company already has certified its technology for more than 4,500 different model devices. Meanwhile, on another front, DivX struck a deal with four Hollywood studios on Aug. 26 that enables consumers to download thousands of movies from an online store, FilmFresh.com, and watch them on DivX-certified device.

Kevin Hell

Kevin Hell

Amid this flurry of recent developments, DivX CEO Kevin Hell gave me a fresh take on the company’s strategy in a fast-moving industry, especially as it relates to Internet TV, which he says is undergoing a fundamental shift. “Internet TV has the potential to re-order and revalue the media value chain—at least the way that broadcast TV works today,” Hell says. As digital television moves increasingly beyond standard definition to high-definition—and from broadcast and cable TV networks to Internet-based video content on demand, Hell says, “We’ve positioned DivX as being the friendly, agnostic ‘any-to-any solution’—from any device to any manufacturer.”

Hell joined DivX seven years ago as chief marketing officer, and later served as the company’s president and chief operating officer before becoming CEO in mid-2007. From 2002, when he joined DivX, the San Diego media company has grown from 35 employees and less than $3 million in annual revenue to more than 300 employees and $93.9 million in sales last year.

Hell says DivX is counting on three broad trends: Video content is moving beyond the TV and becoming unbound from television production studios; Internet TV is expanding rapidly; and Hollywood films are expected to become a “premium content” mainstay. “There are a lot of things to work through here,” Hell says. “It could take five years, maybe even more. Initially you’re going to have broadcast television content, and then the premium content, moving to the Internet.”

Hell says that some cable programming, such as the Discovery Channel, MTV, and CNBC, will be “trickier” to make the jump to the Web. “We don’t anticipate some of this content moving immediately over to the Internet,” Hell says. But he says the “cord will get cut” as televisions become more widely equipped with IPTV capabilities, and as websites like Hulu become easily accessible on the big screen TV in the living room.

By the way, Hell says, “The advertising model on the Internet will feel very much like it does today. So yeah, you’re watching advertising [on Internet TV], but it’s much more interesting to you, because Internet TV has the ability to do true one-to-one marketing that people aren’t able to do today.”

Hell sees the market today as “disconnected” because it’s not easy for users to download a movie from the Internet and then watch it on the big screen TV in their living room. A user typically would have to copy the movie from a computer to a DVD or a USB memory stick and use that to transfer the content to their TV. But DivX is anticipating the day when that won’t be necessary, because the TV and other electronic devices will all be connected to the Internet.

Understanding the broad trend helps explain another recent DivX announcement. On Sept. 1, the company said it had acquired AnySource Media LLC, a Malvern, PA, developer of Internet Television streaming technology that enables users to directly connect their TVs to a wide variety of content and services on the Internet. Combining Internet TV streaming technology gives DivX another path for its basic strategy of connecting any device with any manufacturer. As Hell puts it, “We’re really focused on solving the problems of getting high-class video content onto digital devices that are not tied to a specific brand.”

The $15 million price tag of the AnySource acquisition was likely easier for DivX to finance, given that two weeks earlier DivX settled its lawsuit against Yahoo, with the Internet portal reportedly paying DivX $9.5 million. DivX had alleged the Sunnyvale, CA, Internet services giant had breached a two-year toolbar licensing and distribution agreement.

Hell adds that many of the announcements DivX has been making represent deals that have been in the works for years. The company has been working since 2003, for example, on licensing films and other Hollywood content because it has taken time to reassure the major studios that DivX is serious about digital rights management.

As a result, Hell and Dan Halvorson, DivX’s chief financial officer, tell me the flurry of recent announcements really reflects the acceleration of changes taking place throughout the TV and online video ecosystem. Like other information technologies that have been touched by the Internet, DivX sees less filtering and a seemingly limitless amount of online video content that can be accessed on any device, at any time, and any place. “That’s the promise of Internet television,” Hell says, “that it will have a profound impact, not just on watching TV, but on our culture.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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