RICHMOND, VA, September 8, 1997 -- Circuit City Stores, Inc. (NYSE:CC,KMX) announced today that it will increase its investment in Digital Video Express, LP, a partnership that has developed a new system for DVD players which provides significant copyright protection for movies released on Divx digital discs and sets a new standard for home video convenience.

A commitment to invest an additional $100 million positions Circuit City as Divx's majority partner, with approximately two-thirds of the equity. The remaining equity is held by the prominent Los Angeles entertainment law firm Ziffren, Brittenham, Branca & Fischer.

The new Divx system has won support from major movie studios, including Disney's Buena Vista Home Entertainment, Paramount Home Video, Inc., Universal Home Video, Inc. and DreamWorks SKG, and from leading consumer electronics manufacturers, including Zenith Electronics Corporation, Thomson Consumer Electronics and Matsushita Electric. Divx allows consumers to purchase physical ownership of a special, encrypted movie disc for a suggested price of less than $5. The purchase price includes a two-day viewing period that begins when the consumer inserts the disc into a DVD player equipped with the Divx capability and pushes play for the first time. Divx players will play all standard DVD discs, but the lower-priced Divx rental discs cannot be played on standard DVD players.

The Divx disc is never returned, and so the consumer never has to pay late fees. The disc becomes part of the consumer's home video library, with additional viewing periods easily purchased through the Divx player. Consumers also will be able, through the player, to convert many titles to unlimited viewing for a one-time fee, and certain titles will be available for purchase in the store as unlimited viewing discs.

Because the discs are purchased by the consumer, Divx expects to make ample supply available to meet the high demand that occurs when new titles are released to the rental market. The movie studios have signed multi-year agreements to provide all new titles and almost a thousand catalog titles for release on Divx discs. Divx's new titles will be released to the public on the same date as VHS tapes. More than 100 titles are expected to be available at product launch, with a total of approximately 500 available within the first year.

Zenith expects to introduce Divx players as part of the high-end Zenith-Inteq series in a limited launch next spring. Thomson, under the RCA and Proscan brand names, and Matsushita, under the Panasonic brand name, expect to offer players nationwide next summer.

Divx will license and distribute studio productions in its proprietary, digital format and authorize access to those productions via its host computer system. Divx also will license the proprietary hardware architecture to the consumer electronics manufacturers.

"The Divx system offers unparalleled convenience for consumer home video, strong copyright protection and economics for studios and incremental sales possibilities for manufacturers," said Richard L. Sharp, chairman and chief executive officer of Circuit City Stores, Inc. "We believe the tremendous market potential Divx represents creates an opportunity for outstanding shareholder returns."

The company expects that its investment will reduce Circuit City Group net earnings for the full fiscal year by approximately 27 cents, including 3 cents recorded in the first quarter, the 3-cent second quarter impact, 7 cents for the third quarter and another 14 cents in the fourth quarter. The remainder of the investment is expected to reduce net earnings in next fiscal year's first quarter by approximately 14 cents.

Circuit City Stores, Inc. is the nation's largest retailer of brand-name consumer electronics and major appliances and a leading retailer of personal computers and music software. With headquarters in Richmond, Virginia, Circuit City operates 460 Superstores, four consumer electronics-only stores, 52 mall-based Circuit City Express stores and 11 CarMax Superstores. For more information, access the Circuit City web site at http://www.circuitcity.com and the CarMax web site athttp://www.carmax.com.

This release contains forward-looking statements, which are subject to risks and uncertainties, including, but not limited to risks associated with the development of a new concept. Additional discussion of factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in the company's SEC filings.

Circuit City Stores, Inc. news releases are available through Company News On-Call, by fax, 800-758-5804, extension 166181, or at http://www.prnewswire.com.