Sonic Solutions Buying Video Experts DivX to Power Future Net Movie Streaming

sonic divx

Sonic Solutions just announced it's buying out DivX for a whopping $323 million. If you don't know who these companies are, it doesn't matter—you've almost certainly used their products, and the deal is all about the future of TV on the Net.

The acquisition is a straight share buyout, worth $9.83 per share at yesterday's stock closing price, meaning Sonic Solutions could be paying something around $323 million for DivX Inc. That's a 40%+ premium over DivX's price, demonstrating the strength of DivX's product portfolio.

But what is this portfolio, exactly? The most significant chunk is the DivX video codecs, a pair of digital video formats (MPEG 4 Part 2 DivX and H.264/MPEG 4 AVC DivX Plus HD), a series of digits and letters that the more leet computer users among you may identify with pirated video content. This is because this particular video format is highly regarded for its ability to apply powerful size compression algorithms to digital video without sacrificing significant picture or audio quality (to the untrained eye, at least). DivX is much more than this, however, and it's tech is apparently built into over 300 million different devices from HDTVs to Blu-ray players, and "web properties" that use DivX get over 12 million unique monthly visits.

Sonic Solutions is an interesting company all by itself. It was spun out of the SoundDroid digital audio editing system which was a product of the DroidWorks initiative inside LucasFilms, back in 1986 (Pixar is another spin-off of DroidWorks—you may have heard of them?). Back in 2002 the company severed itself from this pro audio editing past, with a sell-off, to concentrate on DVD authoring systems. In 2003 they bought Roxio, a market-leading DVD/CD burning program, and in 2008 they bought the CinemaNow digital movie delivery system. This last enterprise was recently bought from Sonic by Best Buy, as the retailer tried to shore up its Net-based movie streaming efforts.

It's this market that the DivX acquisition is directly aimed at. As Sonic's core DVD market is beginning to look more and more like yesterday's tech, the company is refocusing on the next technology that'll drive the home consumer movie business—Net-based content. As the press release puts it, the aim is 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." What better way to enable this sort of goal than buy up an industry-leading video compression expert? 

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