(FORTUNE Magazine) – Pity Josh Dare. Whenever someone decides to bash the home-video format Divx--and this happens pretty often, since Divx is probably the most maligned consumer-electronics launch since the Apple Newton--there usually comes a point where, for balance, Dare is allowed a sound bite. Dare is the spokesman for Divx's parent company, Digital Video Express, and he spends his days offering up quotations like, "Consumers shouldn't feel confused by Divx."

"When people ask what I do at Divx," Dare says dryly, "I tell them I'm the chief apologist."

Lord knows, Divx needs one: Thanks to the combination of an inept launch and a business model that fuels technogeek outrage, Divx has become a whipping boy among the home-video cognoscenti. Type in "anti-Divx" at the AltaVista search engine, and 450 links come up. One critic called it a "mangy mongrel." Two major studios refuse to supply product for it.

Divx certainly is an odd format: A deck that can play both DVDs and Divx disks costs about $50 more than a standard DVD deck. Divx disks cost $4.50; once you pop one in your machine, you can watch it as often as you like for two days. The disk then decommissions itself; to reactivate it for another 48 hours, you must pay an additional fee of $3.25. The company keeps tabs on you via a phone line hooked into your Divx player. Twice a month, in the middle of the night, your machine calls Divx headquarters to tell it what you've watched; Divx then bills your credit card.

In other words, Divx is a silly, awkward, complex solution to the simple problem that most people don't like returning videos to the store. But what other silly technology has foes like John Giberson, a Fort Worth real estate agent who created the National Organization to Ban Divx Website? "It's very personal," Giberson says. "My site is designed to educate the uninformed masses."

What did Divx do to deserve such opprobrium? It all started in September 1997 when Circuit City and the Los Angeles law firm of Ziffren Brittenham Branca & Fischer announced the creation of Digital Video Express and unveiled the format--just as DVD was about to enter its first big holiday selling season. DVD's early adopters were not pleased, given that Divx had lined up several movie studios that had held back films from release on DVD. Since Divx disks won't play in standard DVD players, this raised the specter of a format war, like VHS vs. Beta. Further displeasing the DVD faithful, because Divx was designed for the casual movie fan, its disks don't contain the extras that have become standard on DVDs: no commentary from the director, no cast biographies, and (sacrebleu!) no wide-screen format, all features adored by home-video junkies.

Then there's that phone line running from the Divx player to the wall. The image of your home appliance calling corporate HQ feeds every videogeek's darkest X-Files fantasies. "They have the ability to interrogate your machine" is how Giberson puts it. "They have the ability to know what movies you watch, when you watch them, and how often you watch them." (Never mind that your corner video store or your local cable company can also track your rental or pay-per-view habits.)

All this led videophiles to fear that their beloved, feature-crammed DVDs would be replaced by pay-as-you-go, feature-free ratfink disks from hell. With time, this has become less likely: Blockbuster, not wanting to forfeit its hold on the rental market, refuses to carry Divx disks. Best Buy, perhaps because it's a competitor's system, refuses to carry Divx machines. And while almost all movies are now released on DVD, Sony and Warner Bros. refuse to put out their product on Divx. Indeed, Warner Home Video President Warren Lieberfarb was a leader in developing DVD and is a leading critic of Divx. Says Lieberfarb: "Digital cable and satellite will deliver low-priced video-on-demand that is going to render Divx's pay-per-use system obsolete."

Dare claims Divx players now make up 20% to 25% of DVD player sales. But Circuit City won't provide specific sales data, and in its most recent quarter its two-thirds stake in Divx led to a 32-cent reduction in earnings per share of $1.26. The chain has sunk $200 million into the format and is looking for another partner to share costs.

And Dare? He's in his Richmond office fielding calls. "I used to work for the National Endowment for the Arts," he sighs. "I'm used to not being universally beloved." --Tim Carvell