Davis Freeberg

DivX Considers A Profitable Break-Up, But Are There Any Long Term Benefits?

Richard, I'm not sure that you are understanding what I'm advocating. It's not about selling traffic on Stage6, it's about selling video ads on other websites. The traffic on Stage6 could be used to provide inventory for an ad management system, but the key for DivX is to leverage their relationship with people in the community, so that they'll sell other people's ads for them. Example, Charles Schwab has a hot new commercial, they could go to SA directly for the ad, but maybe they want to buy their ad placements in bulk.

Instead, DivX approaches SA and says, let us sell Schwab ads on your site and we'll pay you more than what Google will. Then they syndicate that ad on the Motley Fool, various technology/business sites, paidcontent, whoever is willing to partner with them. Now instead of having 10 million views to sell, they've got 20 million.

Only half of them are coming from Stage6.com, but they are cutting the content creator out of the monetary stream.

Right now, the business model is to let content creators upload their content, then you sell an ad for that content and split the revenue with the creator. What I'm saying is why pay for content, when so many people will pay you to distribute their content instead. Take a look at Zatz's Not Funny's Google video ad on his site and you'll see that Google is already leading this area of the market.

DivX's total user base is way past 10 million at this point. They've had 200 million downloads last time I checked. The value for DivX is that they don't pay for content, it increasing their profile with journalists, they make a small commission, but more importantly they introduce the DivX player to new web viewers. When viewers download the DivX player, DivX would have an opportunity to make a small commission on the Google toolbar. As a separate company, Stage6 could still do this, but they'd need to keep 60% of the revenue. With DivX's licensing support they could pay out a lot more and then just know that each ad being served is helping to solidify DivX as an industry standard.