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CinemaNow Taps DivX for Movie Downloads

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Divx CinemaNow UPDATED Sonic Solutions (s SNIC), best known for its movie download platform Roxio CinemaNow, is partnering with DivX Inc. (s DIVX) to make its movie titles available in the DivX format. CinemaNow will launch a new web site dedicated to DivX downloads at tomorrow, with the goal of tapping into a potential market of 200 million DivX-certified devices. The partnership will also extend to download portals Sonic Solutions is operating for partners like Best Buy (s BBY) and Blockbuster (s BBI).

The deal is definitely good news for DivX, a company that has been struggling to keep up with the growing importance of Adobe’s (s ADBE) Flash. DivX laid off 10 percent of its staff a year ago, and its revenue has since been declining. DivX has been trying to turn its fate around with a number of licensing deals as well as the acquisition of Anysource Media, but it’s too early to tell whether these efforts will pay off.

The cooperation with CinemaNow will mark the first time mainstream content will be available for rent in the DivX file format. Sonic Solutions is slated to launch a Best Buy-branded movie download site, and it’s also cooperating with the retailer on over-the-top video delivery straight to connected devices sold at the retailer’s stores. DivX partnered with the relatively unknown movie download portal FilmFresh earlier this year, but that deal was restricted to movie sales.

DivX has been a pioneer of downloadable media and as such, has been able to capitalize on the popularity of video downloads with file sharers. For a while, DivX was almost synonymous with compressed full-length movie downloads from file-sharing networks. The company used its popularity to license its technology to a number of hardware vendors and now has around 200 million devices in the marketplace. However, many of these DivX-certified devices are standalone DVD players, leaving it up to the consumer to download content to their PC and burn it onto DVDs.

DivX also briefly toyed with the idea of a YouTube competitor called Stage6, but quickly shut it down to avoid copyright infringement claims. The company still makes a healthy amount of money from its software business, selling pro versions of its DivX encoder to consumers and cooperating with Google (S GOOG) to bundle software with its free DivX player. In fact, bundled third-party software was at one time responsible for 21 percent of DivX’s bottom line.

But DivX took a hard hit when its toolbar partnership with Yahoo (s yhoo) ended last year, and the company has yet to recover from the resulting loss of revenue. Its most recent SEC filing, DivX showed $50 million in revenue for the first three quarters, compared to $70 million during the same time frame in 2008.

Adding to this is the fact that Adobe has made huge inroads with adding Flash to connected devices. Adobe CTO Kevin Lynch told us at NewTeeVee Live that a first generation of Flash-enabled TV sets and CE devices will be available by the end of this year.

Update: DivX got in touch with us to clarify that the deal is actually just about download-to-own and doesn’t encompass any rental component.

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