Jerome Rota flips back his heavy-metal-length hair, clicks the mouse and retrieves the first file he ever encoded with the software program known as DivX. A Hugo Boss advertisement appears on his computer monitor. Bass-heavy music starts to pump in the background as a computer-generated graphic of the Boss logo flashes from left to right and a dark-haired model stares seriously at viewers.
The software "wasn't for movies," says Rota, a French graphic artist and hacker who goes by the name "Gej." "It was just a good codec. I made it for me, for my infographiques."
Microsoft made him do it, Rota says. He had originally used a piece of Microsoft software -- namely the Windows Media "codec" (short for compressor/decompressor) that enables users to compress digital video -- to shrink the size of the ad he had created so it would fit snugly onto a CD-ROM. But in September 1999, Microsoft released an upgrade of Windows Media that failed to play what was essentially Rota's artistic portfolio and résumé. Instead, the new program presented only a blank screen. Rather than reencoding the work with Microsoft's new codec, Rota decided to rework the codec's code.
"I set the information free," he says, smiling behind round glasses. "It only took about a week."
One week, one program and a potential revolution in digital video. DivX shrinks video to about a fifth of its original size, making it possible to download a full-length movie from the Net to your hard drive in less than an hour. DivX is to video what MP3s are to music. A year ago it was almost entirely underground; today more than 12 million people have downloaded the software. Web sites offering support, new applications or chat rooms appear almost daily, while DivX-encoded content -- hard to find and difficult to download nine months ago -- now appears all over the Net. File-trading services like Gnutella and Hotline, for example, regularly index more than 7,000 servers with DivX downloads. Pornography, the latest "Simpsons" episode, "Crouching Tiger, Hidden Dragon" -- just about anything you can see on television or in the theaters you can now get online and for free. "It's unbelievable what's out there," one trader says. "I download a movie just about every day."
Rota left the French Riviera last summer and moved to San Diego to found DivX Networks. He now spends most of his time behind an uncluttered desk in an office filled with beanbags -- an office, incidentally, just one floor below where another potentially revolutionary Net start-up, MP3.com, first housed its headquarters.
The juxtaposition is more than just an amusing coincidence. Rota's dream is to make DivX the MP3 of movies, and like MP3.com founder Michael Robertson, he also wants to build a profitable business on top of a format. He intends to make DivX the worldwide standard for digital video, putting the code in set-top boxes, televisions and even movie projectors while making money through services and fees. Ultimately, he wants to pull off an elusive new-economy magic trick: transforming an underground movement into a legitimate, profit-earning venture.
There's scant precedent to offer him encouragement. MP3.com is in hock to the major record labels for hundreds of millions of dollars -- and the company has lost every legal confrontation with the record industry it has faced so far. And Napster, by far the most high profile of the ambitious start-ups looking to mine gold from the new realities of online entertainment distribution, is also reeling under a fierce assault from the recording industry. The companies have won headlines and the hard drives of millions, but their bottom lines still run red. Their chances for survival look dim.
DivX Networks faces similar hurdles, both legal and financial. But Rota and his international band of movie-loving geeks may represent the best chance yet for a bridge between copyright owners and consumers. The company has at least two things working for it: an open-source development model and a surprisingly conciliatory stance from the movie studios.
It's a unique two-pronged approach. On the one hand, DivX Networks is going to the people, opening up the code in its codec so that software developers all over the world can take a look and make their own additions or changes. But DivX is simultaneously cozying up to the big boys -- to the point that none other than the normally vituperative Jack Valenti, the head of the Motion Picture Association of America, is on record as saying astonishingly nice things about DivX: It's "terrific," "great" and maybe even "a wonderful ally."
DivX Networks may be in the happy position of benefiting from all the blood that has spilled so far in the battles between the entertainment industry and the Net. "It's unlikely that history will repeat itself," says Joe Bezdek, a co-founder of the start-up. "Napster could have been avoided."
Rota crosses his hands and leans forward. His orange sweatshirt rubs against the table, which sits in a small, warm conference room with six chairs. In new, untested English that sometimes makes him wince while he searches for the appropriate word, he explains how quickly DivX caught on.
"In less than a week, people wanted it," says Rota. First his friends asked for it. Then Rota mentioned what he'd built in the IRC chat rooms that he frequented, chat rooms in which about 100 digital video experts tended to hang out. Eager and curious, "they all wanted copies," Rota says. "Everyone."
He obliged. A few weeks later, he built a Web site. "There was no how-to page, no ... proselytism, no marketing, no nothing," he says. Yet, in about a month, the site's download page started regularly receiving 500,000 hits per day.
What caused the surge in popularity? Rota and DivX Networks co-founder Jordan Greenhall argue that the codec became a hit simply because of its quality. The DivX faithful agree that it was better than anything else around, but add that DivX also gained ground because of another hot hacker program, DeCSS. The DVD decrypting software -- originally written so people could watch DVDs on computers running Linux -- started appearing on the Web right around the same time as DivX. For those who made a habit of trading pirated movies, it was a match made in heaven. DeCSS unlocked DVD content and DivX made it easy to upload, download, share and play.
Rota heard about what was going on, and at one point even downloaded some old French movies, but he never expected to be implicated in the DeCSS furor. He didn't even expect Microsoft lawyers to come calling about his changes to the company's codec, a threat that many considered far more pressing at the time. He simply continued to live a quiet life in Montpellier, France, staying anonymous as Gej.
But his cover didn't last long. Greenhall tracked Rota down in February and persuaded him to make DivX more than just a cool case of video viral marketing. It was a classic entrepreneurial move. Greenhall is a thin, 29-year-old Harvard Law School graduate who tucks in his shirts and prefers to explain DivX's business plan by drawing charts on 6-foot whiteboards near his desk. He speaks no French and doesn't seem to have much in common with Rota. But when he heard about DivX and checked it out, he immediately got excited.
Greenhall had worked for MP3.com in the same flat, square, modernist brick building that DivX Networks now calls home, and had also spent time at Intervu, a San Diego streaming-media company. But neither job satisfied him.
Greenhall wanted to start something new, something that "disrupted" the media landscape. Drawing upon the theories of his favorite author, French post-structuralist Gilles Deleuze, Greenhall wanted to transform the entire system of entertainment distribution from the bottom up.
Greenhall goes so far as to see Deleuze as a mentor for DivX Networks. The French critic wrote of simple actions having profound effects, of webs transformed by unexpected developments.
"He takes Foucault and then builds on it, combining American-style pragmatism with French philosophy," Greenhall says. "It's exactly what we're doing -- we're building a disruptive technology. So this mode of thought is important. I use it on a daily basis to try and understand how things relate in a novel way. You can think of an industry as a series of forces, and when you introduce a new technology -- like DivX -- it has complex effects on the whole system. You have to try and figure out what they'll be, and that's what we're trying to do."
In the spring of 1999, Greenhall saw DivX as the ideal tool to make theory into reality. He and Rota joined forces with a few others and formed Project Mayo -- the name came from mayonnaise, which like DivX, Rota says, "is French and very hard to make."
The new crew strove to keep their plan top secret, but on July 17, a Wall Street Journal article identified Rota as the mysterious man named "Gej." That same day, during the DeCSS trial, lawyers for the Hollywood studios showed a DivX version of "The Matrix" in court as part of their attempt to prove how easy it was to download pirated movies. The combination of events put Rota and DivX on the map.
Project Mayo, meanwhile, continued working toward its three main goals: moving the world's best digital video experts to San Diego, creating an open-source version of the codec and getting financing. The company received funding in September: Zone Ventures and other investors, including Silicon Valley's Tim Draper, put up $5 million in seed funding. The new codec -- stumbling under the ungainly name "DivX ;-) Deux" -- came later. But the programmers are still scattered around the world, with a significant percentage located in China.
But who needs physical vicinity in an increasingly virtual world? All new hires who make it to DivX Networks in San Diego get a free surfboard, but with the release of DivX ;-) Deux, the codec became officially open source -- the underlying code to the software was made available to the general public. So anyone, anywhere, could grab the code and start working on it.
The reaction was gratifying. Darrius Thompson -- DivX Networks' free-software project head, a geek who looks like a surfer but was compiling Emacs code in third grade -- tried to handle the onslaught. But more than 1,000 queries came in during the first week alone.
"With so many people offering to help, I couldn't sleep," Thompson says. "Just trying to organize them according to their skills was almost impossible."
Today Thompson oversees more than 100 off-site volunteers, who are now busy working on everything from creating a DVD-like, user-friendly interface for DivX to building a peer-to-peer network that would use idle computers to encode videos.
The decision to go open source is a key distinguishing factor between DivX and predecessors like MP3.com and Napster. MP3.com and Napster both want to cash in on the popularity of the MP3 compression format, but that format is itself proprietary code that neither company has any control over. By enlisting the efforts of the same developers who have helped make Linux-based operating systems and the Apache Web server hugely popular worldwide, DivX Networks is plugging itself into the heart of an international movement.
Thompson welcomes both the guidance and the enthusiasm of free-software developers. These days, he sleeps in peace knowing that DivX Networks has protected its code with a software license that makes sure the code is free and public while at the same time trademarking the name DivX ;-) Deux.
"It would really be cool to see the DivX ;-) up on a movie screen and know that we worked on it," he says. But before that can happen, DivX Networks is going to have to succeed on a level that may be a bit more difficult than gaining the enthusiasm of easily excited hackers. The company has to win the trust of the likes of Universal Studios and Warner Bros., and that won't be easy. It may even require some compromises that alienate the very people DivX Networks considers its online constituency.
Monday: How DivX Networks plans to make friends with the movie industry.
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