Divx, as the format is called, could change the face of the video-rental market. But critics say the technology is overly complicated and inconvenient.
Consumers pay $4.50 (£2.75) for the DVD-quality Divx disc. They have two days to watch it, starting from the first viewing. After that, further viewings can be purchased via a telephone link in the Divx player.
Divx users also have the option to buy unlimited viewings of the disc, for about the same price as a standard digital versatile disc, which costs about $30 (£18). Divx players can play DVD, but DVD players cannot play the Divx discs.
Divx caused a stir when it was introduced last fall, as analysts and DVD fans argued it would confuse potential DVD buyers, and slow the growth of the format.
The CD-sized DVDs offer better quality than laser discs, and also include traditional laser-disc goodies such as multiple audio tracks and extra background material. DVD-ROM is also considered the format of the future for PC games and applications. A single DVD can hold several CD-ROMs.
The Divx company is a joint venture of Los Angeles entertainment law firm Zeffren, Brittenham, Branca & Fischer and electronics retailer Circuit City, which hopes to see big profits from sales of the players.
Divx's release was delayed twice because of the lack of titles. About 30 titles will be available along with a Zenith-brand player, which will cost about $499 (£306).
DVD, by comparison, has hundreds of titles available, and has been in stores for more than a year.
Besides concerns that Divx could trip up the DVD marketplace, some also worry that Divx might compromise users' security, since a telephone line connects the player to a remote server.