Build It and They Will Come?

DVD interloper Divx has not won the hearts and minds of early adopters, but that isn't stopping its proponents from laying out some serious cash for future orders. Last week, Nimbus CD International, Inc. and Digital Video Express, developer of the Divx system, announced that they have signed a five-year, multi-million-disc replication agreement.

The companies estimate that the potential for total disc production could exceed 150 million units over the contract period. The actual number of discs produced will depend on the success of Divx in the consumer marketplace. Additional terms were not disclosed.

Lyndon J. Faulkner, chairman and CEO of Nimbus, says, "This large-volume manufacturing contract is an important part of our growth strategy. We are delighted to be the first of only a few suppliers in our industry selected to bring this exciting new product to market. Divx has great market potential, and this five-year agreement places Nimbus in an excellent position to capitalize on the opportunities."

According to Richard L. Sharp, chairman and CEO of Digital Video Express, "This agreement puts in place another key component of the Divx launch strategy and long-term business plan. By bringing together many of the top resources within the entertainment industry, including leading hardware manufacturers, studios, retailers, and replicators such as Nimbus, we have positioned Divx for a strong introduction into and sustainable growth within the home-entertainment marketplace. We look forward to tapping the considerable experience and expertise of Nimbus."

Nimbus, which established itself as one of the first CD replicators to offer DVD production services, is one of the world's largest independent manufacturers of DVDs, having already replicated nearly 2.5 million discs. The company also served as a paid consultant to Digital Video Express during the development of the Divx format in 1997 and early 1998.

Nimbus also announced that it is expanding its DVD production capacity to accommodate the anticipated increase in demand. The new equipment, which will be installed within Nimbus' US operations, will support all DVD formats, including Divx. The expansion will add 12 million DVDs to Nimbus' existing annual capacity, bringing the company's total worldwide production capability to more than 28 million discs per year.

The Divx system is scheduled to be introduced in San Francisco, California and Richmond, Virginia next month; its national roll-out is planned for late summer. Six movie studios have signed multi-year agreements to make titles available on Divx discs.