Sonic acquires DivX to expand online movie delivery options, share of Kazaa downloads
By Richard Lawler 
posted June 2nd 2010 11:04AM
posted June 2nd 2010 11:04AM
Sonic to Acquire DivX
Combination Creates Digital Video Delivery Powerhouse; Streamlines "Over the Top" Distribution of Hollywood Movies
Novato and San Diego, CA (June 2, 2010) - Sonic Solutions® (NASDAQ: SNIC) and DivX, Inc. (NASDAQ: DIVX) today jointly announced that they have signed a definitive merger agreement for Sonic Solutions to acquire DivX, Inc., a leading digital media company, based in San Diego, California. Under the terms of the agreement, approved by the boards of directors of both companies, Sonic would acquire all the outstanding shares of DivX and merge DivX operations into those of Sonic. DivX stockholders would receive a combination of cash and stock equal to $3.75 in cash and 0.514 shares of Sonic common stock for each share of DivX they hold. The acquisition, which is expected to close in September 2010, is subject to approval of the shareholders of both companies as well as applicable regulatory approvals and customary closing conditions.
For more than 20 years, Sonic has been the leader in developing technologies for the preparation and delivery of entertainment content in popular formats - CD, DVD, Blu-ray Disc and most recently Internet delivery of video. The acquisition of DivX is expected to advance Sonic's mission to deliver technology that makes it easy and convenient for retailers, online services, Hollywood studios, and manufacturers of CE and mobile devices to distribute premium digital video content over the Internet. DivX is expected to enable Sonic to deepen and broaden the technology it offers for Internet-based video delivery and expand its relationships with leading retailers and consumer electronics manufacturers.
DivX is a leading digital media company that enables consumers to enjoy a high-quality video experience across any kind of device. The DivX brand is recognized worldwide and supported by a community of millions of consumers. DivX technology - encoders for formatting video, decoders for playback, and digital rights management (DRM) for content protection - resides on over 300 million devices shipped into the global market from all major CE manufacturers including over 8,500 models of digital televisions, DVD and Blu-ray Disc players, and over 80 different mobile handsets. In addition, the DivX web properties enjoy more than 12 million unique visits each month.
Sonic believes that the acquisition of DivX will provide a number of key benefits:
• The acquisition is expected to be accretive to Sonic's shareholders, potentially doubling fiscal year 2012 earnings per share on a non-GAAP basis.
• The DivX technologies are expected to give Sonic a more extensive solution for Internet video delivery including the dominant tools for content preparation in "the cloud," video playback, and Hollywood-approved DRM.
• DivX is expected to provide leverage to Sonic's strategy of consumer electronics deployment – the DivX player and DRM is deployed in products from more than 150 different CE manufacturers worldwide on millions of devices.
• The DivX brand is known worldwide as an indicator of compatibility, quality, and ease of use.
Overall, the combination of DivX technology, capabilities, and market position is expected to advance Sonic's mission: to make publishing, delivery, and enjoyment of movies over the Internet as easy and widespread as DVD delivery is today.
"Our studio, storefront, and consumer electronics partners agree: they want a clear and efficient path to deliver premium content to their customers," said Dave Habiger, president and CEO of Sonic Solutions. "The combination of Sonic and DivX promises to be the foremost provider of platforms, tools, and technologies for the efficient delivery of premium video entertainment to virtually any type of consumer electronics device. We expect DivX's deep technology and broad deployment in the CE and mobile areas to give us significant leverage as we expand and enhance our RoxioNow premium entertainment platform."
"Sonic and DivX are both market leaders in digital media and share similar visions about a better media future for consumers," stated Kevin Hell, CEO of DivX. "We also share similar cultures and both recognize the tremendous market opportunity that lies ahead for Internet video services. By combining our products, technologies, partnerships, and talented employees, we immediately create a complete end-to-end delivery platform for digital media, with expanded reach and capacity, at a perfect time to capitalize on the market's rapid development. With the acquisition of DivX, Sonic should be extremely well positioned to serve existing customers, attract new partners, and increase our market presence and potential."
The current Sonic management team (including Dave Habiger, Clay Leighton, Paul Norris, Mark Ely, and Matt DiMaria) will lead the combined company, augmented with key managers and executives from DivX. Kevin Hell, DivX's chief executive officer, Dan Halvorson, DivX's chief financial officer and executive vice president, operations, and David Richter, DivX's executive vice president, business & legal affairs and general counsel, will be cooperating closely with the Sonic team to close the transaction and integrate the companies, but will not continue in the combined company in their current positions. Following completion of the merger, DivX stockholders will own approximately 35% of the combined company's capital stock. Sonic expects to add two members of the DivX board of directors, to be named later, to its board at the closing of the transaction.
Oppenheimer & Co. is acting as DivX's exclusive financial advisor in the transaction.
Sonic Earnings Preview and Announcement
As previously announced, Sonic plans to release its financial results for the fourth fiscal quarter and full year (ending March 31, 2010) on Thursday, June 3. In order to facilitate discussion with investors on the impact of the DivX merger, Sonic is announcing today the following key points from its upcoming earnings announcement:
For the fourth quarter ended March 31, 2010, Sonic recorded $26.4 million in revenue, $1.2 million in net income or $0.04 per fully diluted share on a GAAP basis. Sonic expects that, for the first quarter of the 2011 fiscal year (the quarter ending June 30, 2010), it will generate approximately $25.0 million in revenue.
Shareholders and investors interested in more detail are encouraged to review the announcement Sonic will make tomorrow, as well as Sonic's Annual Report on Form 10-K, which it plans to file shortly. In light of today's announcement, Sonic will not be hosting its previously scheduled earnings conference call on June 3, and instead encourages participation in the following joint conference call.
Conference Call Regarding DivX Acquisition Members of the Sonic and DivX management teams will lead a conference call to discuss details of the acquisition on Wednesday, June 2, 2010 at 5:30 am PDT (8:30 am EDT). Investors are invited to listen by dialing (877) 293-5493 (domestic) or (707) 287-9350 (international) or via webcast on the investor sections of the Sonic Web site at www.sonic.com/about/investor/ and the DivX Web site at http://investors.divx.com/. A telephone replay will also be available shortly following the call on Wednesday, June 2, 2010 through midnight (PT) on Wednesday, June 9, 2010. The replay will be available by dialing (800) 642-1687 (domestic) or (706) 645-9291 (international) and referencing the conference ID number 79492916. A replay will also be available via Webcast at www.sonic.com/about/investor/ and the DivX Web site at http://investors.divx.com/.
About DivX
DivX, Inc. is a leading digital media company that enables consumers to enjoy a high-quality video experience across any kind of device. DivX creates, distributes and licenses digital video technologies that span the "three screens" comprising today's consumer media environment-the PC, the television and mobile devices. Over 300 million DivX devices have shipped into the market from leading consumer electronics manufacturers. DivX also offers content providers and publishers a complete solution for the distribution of secure, high-quality digital video content. Driven by a globally recognized brand and a passionate community of hundreds of millions of consumers, DivX is simplifying the video experience to enable the digital home.
They should bring back that awesome divx streaming site.
@Appl I forget the name
@Appl
Stage6
Oh god thank you, I read that and thought it said "Sony acquires DivX."
@admlshake It DID say Sony for a few minutes. Then they changed it :)
@scoobydooby no, it didn't.
@RichardLawler - My apologies then. I could have *sworn* that it sad Sony. I even went to Sony's site and didn't see it mentioned there - plus there were references to Sony and Divx linking to Engadget on Twitter.
It did seem weird to me that Sony would buy them :)
@scoobydooby
It definately said Sony. I skipped the title and read the article and messaged my friend to say about the purchase. I saw the headline in my Google Reader notification extension in Chrome.
Then I scrolled down and read your commends and was amazed to scroll up and read the title and saw it said Sonic. It would be sketchy if I happened to selectively see Sony and you did aswell.
@Kalyse Power of suggestion. Last time I saved the post at 10:44 it said Sonic, it went live 20 minutes later.
@Kalyse
Another proof of poor editing from engadget. If you edit a post, at least inform us that you did
Wheres the hedgehog?
@j2daake
what's up?
@trevr He's talking about Sonic the Hedgehog.
DivX can be sold as their Mpeg4 and h264 technology is going to be replaced by Google Web-M in all consumer electronics devices.
@Charbax
Doubtful. The MPEG-LA has already said that WebM infringes on their patents and intellectual property -- so anyone who wants to use it is going to risk a lawsuit, or will have to pay licensing fees to the MPEG-LA.
@Charbax
Similar to the way Wave replaced e-mail and Buzz ate away at Twitter?
Contrary to popular belief Not everything Google touches is Gold. Actually I can only think of one....search.
@Joao
Android an YouTube were purchased.
@DoctarPeppar Mpeg-La can sue all they want. They are never going to be allowed to own all video codecs. and also, it's too late, mpeg-la never sued ogg theora so they will have no merit. If you don't "protect" your patents quickly enough, you get no merit to protect them later in the courts. And also, look at the list of companies supporting Web-M, it's basically anyone who is not part of Mpeg-LA.
@Charbax I find it ludicrous that companies can actually charge other people to use code they didn't write or sue them for using something they didn't make.
As a developer (and a Brit), software patents just piss me off.
@The Madman
So you are saying that if you purchased a company for lets say $500,000 because they had code that you can use. You develop a piece of software and charge $1000 for that software.... then someone uses the same piece of code (without your permission) for a like software and charges half your price... that's ok? I guess I can see why that would not piss you off.
I hate patent abuse (like patenting the shape of a phone for instance) but software patents are needed.
Just saying
@Puggs
You owe me $5 license fee as I have filed an intellectual patent on conveyance of an argumentative approach or state shown by usage of any number of sentence fragments - including "just saying" and "just sayin'".
The big problem with patents is that they should never have been granted on things which are obviously discoverable.
All this BS about patenting multi touch or certain gestures and the like is just that - BS
The abuse of patents is extremely problematic as they were meant to promote innovation and competition and instead today often squelch it.
They are therefore detrimental to the public at large and the whole thing needs serious revamping.
I was hoping Obama would get to that and torte reform.
But with so much on his plate it is seeming doubtful to me know.
@Charbax No you don't need to diligently "protect" patents. Look up "patent troll", "submarine patent", "defensive patent", "Eolas v. Microsoft," etc., etc. You're thinking about trademarks.
Oh crap.
Thats a g1 and archos... both support divx, (badly admittedly, you need better hardware, ran smooth enough on my hero), but when did the iphone get divx support? I find it unlikely to actually ever happen... it would be competition to itunes?
@Stotherd No idea about the iPhone, but the Zune HD has native DivX support as of the last firmware update.
@Khav The Zune and XBox are not "DivX Certified" which means they are not on this list: http://www.divx.com/en/partner/certified/oemodm
Beware of nebulous claims of "divx/xvid/avi support" on devices that are not DivX Certified and do not carry the DivX logo. It probably means they do not fully support DivX features such as subtitles, multiple audio/video tracks, interactive menus or DivX VOD services like http://wbshop.com digital downloads. To ensure compatibility, always use genuine DivX software and DivX certified devices.
So now we can have drive-in divx movies with burgers and fries! Yes!
"illegal download enabling codec" lol...
The only point at which DiVX was illegal iirc the 3.11 alpha version which was basically just a hacked Microsoft codec.
@DoctarPeppar : Xvid FTW!
@DoctarPeppar I think what they meant was that its most widespread use was for pirated videos.
@One Love
I think x264 is better than DivX HD or Xvid.
When I think of DiVx I think of the abysmal rent to own DVD service that Circuit City tried to shove down everyones throat. But than again I'm old school.
@Joao : its too soon.
Am I the only one who thought of the P2P program Kazaa at the initial glance of the title?
you're all welcome
My first quick scan of my Engadget RSS feed meant I misread as SONY buy DivX. I comedy spat my rolling rock all over my monitor in the style of AVGN I tell ya!
Sony buys DivX...why isn't this breaking?
@Sogeking SonIC
@Spindel
I noticed right after I commented -_-
Anyway, it's DivX!!!1
what's up?
@trevr
bah, ignore the reply fail -__-
DivX is awesome, the only thing worth streaming or downloading on the net have to have a DivX stamp on it...at least for me.
So...we can start looking forward to free crappy root kits in our Divx now??? Or am I thinking too much into this??
I remember the first time the DIVX name emerged it was NOT a codec. It was a DVD-type format of discs you could only watch for a certain period of time that cost about the same as a rental.
It will be interesting to see if things will come full circle, as now it will again be a format you pay to watch once for about the cost of a rental - except now there is no physical media. Physical media is going the way of VHS anyway.
@tbtregenza
Actually it had been in use as an avi codec for several years before the Circuit City foobar.
I thought it said Sony at first as well, I was hoping it meant .mkv support for the PS3. Wishful thinking, I guess I will still have to transcode via PSMedia Server for now.
@billbytes
lol i was just about to type that they should get mkv on ps3 but you beat me to it. thats all my ps3 needs to become the perfect media player. if it is officially supported by divx, it should be on ps3.
@Tristan88888888
Seriously! I don't get why most media streamer devices out there can natively read mkv container and decode the most popular codecs used within, yet PS3 can't. Having to use mkv2vob and then sneaker-net the files over to the PS3 to watch really sucks. And don't someone jump in and tell me to use some stupid transcoding app over at my PC to real time stream to the PS3, I've tried them ALL and their quality SUCKS.