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Did Stage6 die of natural causes or was it killed?

10 March 2008 1:41 by Rich "vurbal" Fiscus | 8 comments

In February DivX Inc., developers of the best known MPEG-4 ASP video encoder in the world, decided to shut down their highly popular Stage6 video sharing site. Stage6 was initially established in 2006 as a way to show off their successful codec's potential. In only a few months it had attracted millions of users, and plans began taking shape to spin the service off as a separate company.

According to the official explanation given to Stage6 users by a DivX employee, it was being shut down because there wasn't any interest outside the company in either buying it or providing venture capital to fund it. The message stated that "the continued operation of Stage6 is a very expensive enterprise that requires an enormous amount of attention and resources that we are not in a position to continue to provide. There are a lot of other details involved, but at the end of the day it�s really as simple as that."

According to Michael Arrington of TechCrunch that explanation is just plain false. He says that a number of sources involved in the defunct service have outlined a chain of events that took Stage6 from a promising commercial service to being shut down just a few months later. The story begins with DivX co-founder and CEO Jordan Greenhall resigning from DivX, along with a number of other key employees, to establish Stage6 as a distinct brand. Arrington claims that although there was little interest among existing tech companies to buy Stage6, more than a $25 million in venture capital was lined up to spin it off as a separate entity. Under the proposal developed by Greenhall and his Stage6 team DivX Inc. would have retained 20% ownership in the company, and would also receive the bulk of the company's revenue for 2008, which would primarily come from visitors downloading the DivX bundle and installing the included Yahoo Toolbar. Some estimate the potential revenue for 2008 alone at $10 million.

And that's where things start getting very strange. In November, when the final proposal was submitted to the DivX board they apparently changed their minds about the spinoff, resulting in Greenhall's resignation from the company. Around the beginning of February, DivX executives reportedly approached him in an attempt to revive his original plan, but were turned down. And of course at the end of February Stage6 ceased operation.

Thus ended what would appear to be a simple (if bizarre) case of corporate short-sightedness. Or so it would seem if not for a new claim from Brad Greenspan, co-founder of MySpace. Greenspan says he made an offer to buy Stage6 for $11 million nearly a week before it was shut down. In a press release he also claims he still hasn't gotten a response to the offer, despite the fact that it remains on the table.

"After LiveUniverse makes its first offer, DivX Board refuses to engage in any direct dialogue with LiveUniverse for over 5 days," according to the release issued by Greenspan's company Live Universe. "During this time, DivX shuts down Stage6...Directors of public companies have a fiduciary duty to shareholders to try to get the best deal and represent their interests, first and foremost."

Although DivX representatives have declined to comment on either article, they're expected to release some sort of public statement later this week when they report quarterly earnings.

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Permalink to this article | Topic: Online video

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Weekly Glossary updates: 29 February 2008 (29 February 2008)

DivX to shut down Stage6 service at month's end (26 February 2008)

Site Updates: Weekly glossary updates (14 February 2008)

LG's Viewty handset gets certified for DivX (6 February 2008)

TiVo makes deal to bring indie movies to its set top box (18 January 2008)

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DivX Inc. and Sony Pictures announce agreement (10 January 2008)

CES 2008: DivX Connected adds content from Veoh and Vuze (8 January 2008)

DivX follows Veoh's lead and takes Universal to court (9 September 2007)

Pentax launches seventh DivX certified digital camera (23 August 2007)

DivX Stage6 gets beta release (6 April 2007)

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Discuss this article!
nobrainer (Inactive) 10 March 2008 5:23
whatever the reason is, it just sucks. The BPI Are: SONY, UNIVERSAL, WARNER GROUP, EMI. The RIAA Soundexchange Are: SONY, UNIVERSAL, WARNER GROUP, EMI. The IFPI Are: The same anti consumer lot as listed above! The MPAA Are: SONY, UNIVERSAL, WARNER GROUP, DISNEY, PARAMOUNT, FOX. How do you stop anti consumer = its easy purchase only second hand media and avoid their propertarian hobbled by DRM hardware! http://www.boycott-riaa.com/ [ + quote] This message has been edited since posting. Last time this message was edited on 10 March 2008 5:31
2colors (Inactive) 10 March 2008 5:31
All they had to do was charge $1.00 per month. At 17 million visitors a month they would have even made a profit. All that's coming out of DivX is BS. [ + quote]
tripplite (Senior Member) 10 March 2008 6:42
this was pure stupidity, there was no reason to shut down stage6....someone just went insane at the office and started to vent his anger! [ + quote]
camaro17 (Member) 10 March 2008 10:47
hopefully they clean up their act and bring her back online. Peace [ + quote]
A_Klingon (Moderator) 10 March 2008 11:45
I'm confident someone, somewhere, will eventually offer a similar file-sharing (or other) service for DivX content. I figure it's just a matter of time. DivX is just about everywhere nowadays - even in inexpensive DVD players. Just days before they went 'belly-up', I downloaded 4 video-shorts from Stage6, and they all played back fine on my computer and portable Sony LCD player (which obviously has DivX built-in). The video quality was terrific. [ + quote]
atomicxl (Junior Member) 10 March 2008 12:07
*Originally posted by 2colors:* All they had to do was charge $1.00 per month. At 17 million visitors a month they would have even made a profit. All that's coming out of DivX is BS. They'd get in major trouble charging for access. That site was filled with copyrighted content. You can't charge people for illegal access to copyrighted material. You're in a gray area when your site is just hosting files that users upload. Its totally different when you charge because clearly you're profiting from the content thats available (which shouldn't be up there to begin with). Outside of that, old man divx needs to be sent to the pastures. H.264 is the future here today. [ + quote]
A_Klingon (Moderator) 10 March 2008 14:29
*Quote:* Outside of that, old man divx needs to be sent to the pastures. Try convincing the hardware manufacturers of that, who have come out with about a zillion different inexpensive dvd-player models in the last year or so which have Divx capability built-in (practically for free). [ + quote]
leady (Newbie) 13 March 2008 16:34
I really dont know what are the divx's board thinking about. How come is there no one interested in buying or investing stage6? such a foolish and stupid decision ever! [ + quote]