Digital Video Express LP, which is partially owned by Circuit City stores said that while sales of the systems were going well, "we have been unable to obtain adequate support from studios and other retailers."
Circuit City will take a $114m(£69.5m) charge related to closing out the business. The company posted a first quarter loss of $88.8m, Wednesday.
Circuit City Group, the publicly traded electronics division, topped analysts' forecasts of 25 cents a share with profits of $39.3m 41 cents a share on a 15 percent increase in sales to $2.2bn. The Richmond, Virginia-based company reported a loss of $88.8m or 87 cents a diluted share.
Officials said consumers who purchased Divx-enhanced players before June 16 will be eligible for a $100 rebate and said that all Divx discs can be viewed between now and June 30, 2001.
Digital video players, which the company began selling in September, allowed users to view movies on encrypted discs for up to two days. Users were allowed to keep the discs and purchase additional viewings or convert the discs to unlimited play through the Divx-enhanced player.
Circuit City said today that in addition to the rebates, it would cut prices on Divx-enhanced players, and extend the return policy for players purchased before June 16.
Reuters contributed to this story.
Take me to the DVD Basement.