DIVX Divx, Inc. (MM)

Before we begin today’s call, I’ll read a brief Safe Harbor statement. During the course of this call we may make forward-looking statements within the meaning of the federal securities laws. All statements other than those of historical fact may constitute forward-looking statements including, but not limited to those regarding growth and financial performance, financial outlook, strategic and operational plans, and the proposed merger between Sonic Solutions and DivX. All forward-looking statements are made as of today based on current information and expectations and are inherently

subject to change. We ask that you review the cautionary statements in today’s press release and refer to the recent filings of Sonic Solutions and DivX on their joint form S-4 for a more detailed discussion of the relevant risks and uncertainties that could cause actual results to differ from these forward-looking statements. Except as required by securities laws, Sonic Solutions and DivX undertake no obligation to review or update any forward-looking statements. This conference call is not a solicitation of a proxy, an offer to purchase, nor solicitation of an offer to sell shares of Sonic Solutions or DivX, and is not a substitute for any proxy statements or other filings that may be made with the SEC with respect to the merger. Now I’d like to turn the call over to Dave Habiger.

Sure, yes. I wouldn’t think there should be much angst from investors regarding Best Buy. I think Best Buy is doing, from our perspective, a very good job of bringing CE manufacturers in line with our technology. Their launch has been multi-faceted. I give them a lot of credit for that six percent attach rate, and I expect that will grow higher. They’ve done everything from

coupons to training folks at their Magnolia stores. You will increase — you can imagine when you launch a program, you can’t — there’s not a single day where it all unfolds. They’re going to continue to build momentum, continue to run programs and focus on the most important thing in the short term which is make sure that device manufacturers have the right software loaded to help the studios get movies delivered in this new format or this new model. So from our perspective they’re doing a very good job. Their relationship could not be stronger. We’re very happy, and going forward, I think you should see — expect to see all the things that you would expect and anticipate from a major retailer who knows how to sell content. They’re going to do promotions with studios. They’re going to train their staff and develop apps for integration with theatrical release. There will be plenty of things coming up, but I think you should expect what you typically see from Best Buy when promoting an important initiative that they have a strong stake in.

Yes, Ralph, this is Paul. It is — hey, Ralph. It’s difficult, of course, to be talking about the specific timelines for Best Buy, but I can say that all the indications we have is that Best Buy is backing this in a very major way, and

they are looking to be a significant player in the premium content digital delivery space. And I think, as Dave said, you’re going to see lots and lots of activity. It’s just not stuff that we can quantify for them right here, and I do appreciate you guys are all looking for more information, and it will be coming very soon.

And just to add to that, I mean one of the things that DivX brings to the RoxioNow digital locker more broadly is 300 million plus devices that are not connected to the Internet that are sitting on top of television sets today that can

play back the content that you purchase. So you might want to watch it initially streaming it to your connected device. But then if you want to watch it in another room, and you’ve got a device that’s not connected to the Internet, and it is DivX, you’ll be able to move it to that device or move it to your mobile telephone or move it to your digital television if you have a USB stick and it’s DivX certified. So it really gives you a tremendous amount of flexibility at the consumer experience level that really adds to the overall digital locker in terms of what it can do for you.

Yeah, hi. Thanks. Can you give us an update as to the number of titles that are available right now, library titles? And then, did your comments in the prepared remarks about what discussion you guys are having, what you’re doing with DECE — can you help us understand where you are, where they

are, when do we see more titles, is this merger partially a catalyst for that? So just kind of give us an update on titles, when do you think more titles are coming, and any additional comments you can make did DECE?

Hi, Paul. This is Dave. We obviously have a proxy and documents on file. We have — there’s certainly cost synergies. We’re two public companies, so it should be obvious. I think it’s — everyone at DivX and Sonic knows that some of that synergy is headcount, right? So, we’ve got two organizations. In some cases there’s overlap. There will be some headcount reduction. There will be some just simple cost savings. We have a reasonably good idea what that will be. Until the transaction closes, we’ll hold off on giving guidance and

direction there. But certainly we’re making progress as — in the planning process with both DivX people and Sonic people to figure out how we best come up with a very strong company that can execute on a very interesting moment in time. Doesn’t happen very often in this space.

Sure. The — MainConcept is actually someone that we’ve licensed content — licensed from in the past and as in, frankly, most of the industry licenses from because it’s by far the best software and API and enterprise software out there. We — Sonic’s professional tools business and our licensing business have historically always been nice, high — profitable businesses, but they’re extremely strategic. So I think that combined, those businesses have — will grow. We’ll be able leverage the fact that Sonic’s doing one-half the equation and MainConcept has always done the other half of the equation in the

professional tools business. We get some pricing power. We certainly end up with a — the ability to — and a financial incentive, to push that technology in places where we never would have before. The strategic benefit is probably as significant in addition to the revenue synergies, and that strategic benefit is that we are building, and have been, what essentially is the next new format, that unlike DVD and Blu-ray and standard disc, electronic sell-through doesn’t have a format. No one’s come around and decided what codecs and technologies are going to be the formats in the future.

Well, I’ll step back and say we’re not allowed to talk about studios’ pricing initiatives or anything else. That’s really up to studios to talk about. I think you can look at the stats to date. There’s clearly public information that shows that the studios have a strong desire to exercise this channel and drive this channel. So they’ve — obviously the pricing has been going down, not up, over the last year. They certainly — the windows have favored electronic models, whether it’s the rentals that we do, the subscription models that we’ll be doing, the purchase models. It’s clear that they’re providing rights that have never been provided in the past. They’re providing movies, in some cases digitally, before they go out to disc. So, maybe, you’ve got windows that could get even larger. They are providing movies the same day they come out on disc. Those are things that just didn’t happen a year ago. That was just not something the studios were doing, in part because this wasn’t built. Even if you wanted to do those things, there wasn’t a channel to exercise it. You know, we’ve been working hard to help build out, help get the oil from oil

well to the car, and you’ve got to build out an infrastructure for that. It’s getting close to being built. The rights flow. So you can look at what studios have done as far as rights, the ability to move content between multiple devices. When you’re in RoxioNow, you buy a movie, you can go up to five devices, put your name and password in and go into a different TV or Blu-ray player and all those movies you bought are online, and you hit play and they start streaming in six seconds and at a high quality.

The more difficult answer is, those are just adjectives to describe a transaction. And when you move out of first-sale doctrine content, disc-based content into a digital model, those words don’t really mean a whole lot anymore. Rental and purchase become a little bit gray. And so I think there are a lot of different models that different retailers have in mind, different studios have in mind, and ultimately, the market will figure that out. I think that clearly rental, right now, dominates purchase because of price, right? I mean at the end of the day it’s rental — I don’t think that people are in love

with the model. They just are going to watch a movie most likely once, and the price matters. And so, that being said, I want to make sure that we don’t somehow make a projection on a business model. That’s not our business.

A lot of questions there. Most we can’t answer, as you can imagine. We certainly can’t talk about specific studios. Well, let me give you some parameters. Every studio has got different models. There are certainly — different content has different rights. Different content within rights of categories have different pricing. So you have got things like catalog content, which is older-type movies that are not new releases where you pay a fee once and you can play it as many times as you want for the next six months. So if you’re a cable channel, for example, you might buy a set of movies or content,

and you can play it 24/7, and it doesn’t change the way — it doesn’t change your pricing. When you deal with new content like premium content, so new releases, those are transactional based, whether they’re bought or rent. You buy or rent a movie, and every time you buy or rent that movie, the studio is compensated.

Yes. Very shortly, as you’re aware, we filed the definitive proxy a few weeks ago. We are expecting as we mentioned in the prepared remarks that we will be going through the process of responding to any questions the SEC has on

the merger and then promptly filing the proxy, the definitive proxy, after that. We’re still contemplating essentially the same time frame as we contemplated when we announced the deal at the beginning of June, which is that we would hope to have the shareholder meeting by the end of September, depending on whether we can move things along a little bit quicker. It could move up a little bit, or it could move back a few weeks, but basically we’re looking at about the same time frame.