Sorting Out Future Technologies
This elastic supply response has also dictated a strict market test for innovations in the movie rental business---such innovations mush be cost competitive with existing methods of distribution or they will not be adopted. The fate of “Divx” technology provides an instructive example. This approach (primarily organized by the Circuit City chain of electronic stores) offered movie rentals on nonreturnable DVDs. The rental outlet monitored each showing through computer modems and imposed extra changes for additional viewing. Because consumers had to purchase special equipment, Divx gained few adherents.