DivX announced today it would spin off Stage6, its high-quality YouTube alternative. This is bad news for video-sharing sites, showing they’re having trouble holding their weight without the subsidy of venture capital or Google-level resources. Stage6 appears to have been too much to handle for its moderately successful public company parent.
According to a statement from DivX, the move was driven by a desire to decrease operating expenses, as Stage6 requires a lot of capital, especially as it gets more popular. The public company DivX will now resume its focus on higher-margin business of licensing consumer electronics makers to use its codec.
DivX is currently trading at $14.27, down $0.62 today and way down from an all-time high of $31.89 last November. The company only IPOed last September.
“We have two synergistic and fast-growing businesses that have distinctly different financial models,” said DivXco-founder and CEO Jordan Greenhall, who is leaving his position at DivX to run Stage6. “Stage6, which operates more like an entrepreneurial stage company, will require substantial additional financial investment to continue its dramatic traffic growth and realize its full potential.”
Stage6 (which GigaOM had the scoop on when it launched last year) may have shot itself in the foot by differentiating on streaming quality. It’s actually doing pretty well in terms of traffic; the company reports it say 10 million unique visitors in June, up from 4 million in April. But traffic doesn’t pay the bills; it just makes them bigger. Still, splitting off from DivX shouldn’t necessarily have any negative effects on the site or its growth.
A DivX spokesperson declined comment for the meantime, but promised to add more detail later on.