Disney, Paramount, Universal, DreamWorks, Zenith, Thomson, and Panasonic Make Major Commitments to Divx Technology

System Offers Superior Copyright Protection, Consumer Convenience

HERNDON, VA, September 8, 1997 - Digital Video Express, LP, a partnership between Circuit City Stores, Inc. (NYSE:CC,KMX) and a prominent Los Angeles entertainment law firm, announced today that major U.S. studios and leading consumer electronics manufacturers will support the new Divx system for DVD players which will provide significant copyright protection for movies released on Divx digital discs and unparalleled consumer convenience for in-home movie viewing. Disney, Paramount, Universal and DreamWorks all have agreed to provide movie titles for release on Divx discs, and Zenith, Thomson and Matsushita Electric will manufacture DVD players with the new Divx capability.

Divx is simple and convenient. For a suggested price of less than $5, the Divx system allows consumers to purchase physical ownership of a special, encrypted movie disc that is the same size as the audio compact discs with which most consumers are already familiar. The purchase price of the movie disc includes a two-day viewing period. The viewing period begins only when the consumer inserts the disc into a Divx player and pushes the play button, be it on the day of purchase, the next week or even months later. Discs may be paused, stopped and played multiple times during the viewing period. Divx-equipped players will play all standard DVD discs, but the lower-cost Divx rental discs cannot be played on standard DVD players.

The consumer owns the disc and is therefore never required to return it, eliminating all late fees. Divx discs may be added to the consumer's home video library, and additional viewing periods may be easily purchased through the Divx player. For many titles, consumers will be able through the player to convert a disc to unlimited viewing for a one time fee. Certain titles also will be available for purchase in the store as unlimited viewing discs.

The Divx system incorporates extraordinary safeguards against movie copying and piracy. Its multiple layers of protection include individual serialization of players and discs, triple DES encryption, watermarking and analog copy prevention.

Divx was developed by a partnership that includes Circuit City, the nation's largest brand-name consumer electronics retailer, and Ziffren, Brittenham, Branca & Fischer, a prominent Los Angeles entertainment law firm. "Divx believes this product provides significant consumer benefits that will expand the market for all digital home theater products," said Richard L. Sharp, chairman and chief executive officer of Circuit City and the current chairman and chief executive officer of Divx.

Disney's Buena Vista Home Entertainment, Paramount, Universal and DreamWorks all have signed multi-year agreements to provide feature films to Divx. Because Divx provides superior copyright and piracy protection, the studios have committed to make all new titles, and almost a thousand catalog titles available for release on Divx discs. New titles will be released on Divx on the same date available on VHS. Discussions also have begun with other major studios. "We believe this product provides a significant benefit for the entire home video industry and anticipate that additional film suppliers will join in before the product is launched," said Sharp. More than 100 titles are expected to be available at product launch, growing to almost 500 in the first year.

Divx plans to make ample supply available to immediately and fully meet demand when videos are released to the rental market. Divx expects that discs will be sold by a variety of retail locations, including video rental stores, video and audio sell-through retailers and other software outlets such as consumer electronics and general merchandise stores.

"Our participation in Divx is part of our overall DVD strategy. Divx's advantage is its effective encryption technology that will protect our product against digital piracy as Disney enters the DVD market," said Michael O. Johnson, president, Buena Vista Home Entertainment. "As well, Divx uniquely offers the consumer more choice in their method of renting and purchasing movies for in-home viewing. This was a key factor in our decision to release our films on Divx, alongside DVD and VHS."

"Digital products offer consumers the possibility of a new and exciting way to enjoy movies," said Eric Doctorow, president Worldwide Video, Paramount Studios. "However, digital products also create far-reaching copyright and intellectual property piracy concerns which have not been addressed to date. The Divx system proposes to address these concerns which is why we are participating at this time. It is a highly encrypted closed-system technology that is intended to provide a greater level of security. Furthermore, Divx discs present an exciting retail opportunity to expand the home video rental and sale market by increasing traffic in video stores."

"We at Universal believe that the Divx system provides broader availability of our movies, which could dramatically increase consumer interest in DVD, " said Louis Feola, president, Universal Home Video. "Home Video continues to be a very important segment in the management of the product life cycle and DVD is a revolutionary new medium for the home video industry. The Divx option expands our DVD distribution so consumers will have an even broader alternative to satisfy the demand for movies at home."

"At DreamWorks, we want our products presented in a manner that will insure the best possible experience. We support Divx because it embraces the newest technology, offers the consumer real choices and is a valuable opportunity for the video industry to grow," said Jeffrey Katzenberg, principal of DreamWorks SKG. "It's good for retail and great for the consumer, a win-win proposition."

Zenith Electronics Corporation, Thomson Consumer Electronics and Matsushita Electric will include the Divx-equipped player in their DVD product lines. Players are expected to be shown at the Consumer Electronics Show in January 1998. The players and discs will be available to the consumer in two yet-to-be-announced markets beginning in the spring of 1998 with national roll out expected by early summer. Manufacturers expect to broadly distribute DVD players with the Divx capability through their standard retail outlets.

Consumers who purchase Divx players will establish an account with Divx for billing of any additional disc rentals beyond the initial purchase and any rental disc conversions to unlimited viewing. The player plugs into a standard phone jack; however, the phone line is not used during movie play. No new phone line is required since the player never interferes with the consumer's phone usage. The player periodically calls the Divx processing center in "off-hours" to send information for billing.

"Divx provides extraordinary consumer convenience and will help move DVD technology into America's family rooms," said William J. Sims, president of the Zenith Sales Company. "This innovative system will add to Zenith's arsenal of digital products, including conventional DVD players, digital set-top boxes and future digital HDTV sets."

"We expect that consumers who are normally heavy movie renters will be attracted to Divx players that can deliver entertainment from today's DVD discs as well as the forthcoming Divx discs," said Michael D. O'Hara, vice president, Core Business Product Management for Thomson Consumer Electronics.

"Matsushita Electric has been a leader in the development of the DVD standard and the technologies that support it," said Toshikuzu Yosumi, director of Matsushita Electric Industrial Co.'s Optical Disk Systems Division. "The Divx feature that we will incorporate into selected Panasonic DVD players will expand the range of choices and offer extra value to consumers."

The first products will be manufactured by LG Electronics and sold as part of the high-end Zenith-Inteq series from Zenith Electronics Corporation. Thomson Consumer Electronics will introduce products under both the RCA and Proscan brand names, and Matsushita will market products nationally under the Panasonic brand name.

"Divx takes DVD's outstanding consumer features -- digital picture and sound quality, durability and "no-rewind" -- and adds superior copyright protection and a convenient rental system," said Sharp. "We believe that bringing a significant number of affordable software titles and leading brand-name manufacturers to market concurrently will further enhance the consumer's interest in the entire home theater experience."

Divx will license film productions from the major studios, distribute those products in a proprietary, digital format and authorize access to those movies via its host computer system. Divx also will license its proprietary hardware architecture to consumer electronics manufacturers, enabling DVD players to incorporate the Divx capability. International plans are under development.