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DivX, Inc. (Nasdaq: DIVX), which develops video applications, thought it could succeed in the topsy-turvey web business. So, in late 2006, the company launched Stage6.com.
Well, for the most part, it's not as easy as it looks and now DivX is closing down the site. Interestingly enough, DivX wasn't able to find a buyer for the property.
What happened? Well, I had a chance to interview Chase Norlin, who operates Pixsy (an online search engine). According to him:
"Stage6 likely needed a sugar-daddy to support operations going forward (e.g. acquirer with resources or large capital raise). Given the popularity of the service and the high quality of their streams, they probably had a significant bandwidth bill without the monetization to support that in the short term. Additionally, legal issues around copyrighted material may have added to the decision."
"The shut down also speaks to the proliferation of online video sites and the fact that the market can't support all of them. It also says that investors aren't willing to pony up large amounts of cash for companies that are following in the footsteps of Google Inc. (Nasdaq: GOOG)'s YouTube, which means that potential exits in this category may be limited except for the top 5 players."
Tom Taulli is the author of various books, including The Complete M&A Handbook
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