As if Yahoo doesn’t have enough financial troubles. San Diego based DivX is suing Yahoo for $25 million in damages. Allegedly Yahoo had breached an advertising agreement with DivX accounting for more than 20% of their revenue.
The contract between Yahoo and DivX was set to expire at the end of 2009, and only 9 months into 2008 Yahoo had stopped making payments. During those first 9 months DivX received $15 million in revenue under the deal.
When a similar agreement with Google ended last year, Yahoo snatched up the opportunity and won the deal with DivX that would have the Yahoo Toolbar incorporated into DivX downloads.
Yahoo has been slashing costs lately including mass layoffs. Trying to get out of this deal is likely just another way for them to try and save money. On Nov 11, Yahoo had demanded that DivX renegotiate the contract to eliminate termination restrictions and reduce the payment terms.
