Grouper is 8th largest among the companies
that host user-generated videos on their Web sites,
according to statistics provided in May by traffic-tracking
Online video is white hot and analysts have predicted that
several big entertainment companies would begin shopping for
acquisitions that could offer audiences. All the
entertainment moguls are said to want to duplicate the
success of News Corp.'s Rupert Murdoch. The media tycoon
acquired social networking site MySpace for $580 million
last year and he's already made his initial investment back.
Earlier this month, Google agreed to pay him $900 million to
serve search and advertising listings to MySpace's 100
million users. Since then, the talk has been whether one of
the big entertainment players would go after YouTube, by far
the largest of the video sites. YouTube executives have
continuously said they weren't interested in selling, but
that hasn't stopped observers from guessing on the company's
worth. The guesses have ranged from $500 million to $1
Sony apparently opted for a less expensive entry into online
video. But Sony had to do something, said Ben Bajarin, a
consumer technology analyst with Creative Strategies. The
company's Web strategy has foundered, he said.
"Connect (Sony's digital music site) has been horrible,"
Bajarin said. "They definitely need an iTunes' equivalent.
What they are likely going to want is to capitalize on their
own content and marry it with some user-generated content."
Bajarin said Grouper's users are mostly teens and young
adults who are comfortable buying on the Web. To such an
audience, Sony may be able to sell music and consumer
electronics, as well as movies over the Web.
"Many people in the Grouper community use Sony cameras to
create videos and Sony Vaio computers," Sony Pictures CEO
Michael Lynton said in a statement. "It makes sense to
complete the circle by having Grouper be part of Sony."
But Sony isn't getting MySpace. When Murdoch bought that
company it had already established itself as a juggernaut.
Grouper has less than 1 percent of the video-sharing market
share, compared with YouTube's 43 percent share, Hitwise
reported. Visitors to YouTube spent more than 13 minutes on
the site, while Grouper's users hung around for just more
than 5 minutes.
The Sausalito, Calif.-based Grouper was founded in 2004 by a
group that included Josh Felser, one of the founders of
Spinner.com, the music site sold to AOL in 1999 for $350
Felser, 42, has remarked recently that the market for
video-sharing sites has been heating up but that Grouper's
leadership was not seeking a buyer.
"We had other options including financing," Felser said.
"When this started, we were pursuing an operating deal with
them. We made this deal because we want to win and we think
Sony will help us do that."
For the burgeoning video-sharing market, the Grouper
purchase raises some important questions. Is Grouper the
first fish to be netted in what analysts expect is a likely
industry shakeout? If so which properties are the most
Competitors in the sector number more than 200. Among those
companies that made Hitwise's top 10 in market share, few
are standalone companies. Besides YouTube, some of the other
video sites that have attracted attention are Revver,
Metacafe, Heavy.com, Dailymotion and Guba.
San Francisco-based Guba already had a relationship with
Sony after having signed a deal in July to distribute Sony
movies. Guba's CEO Tom McInerney said he isn't worried about
Sony wanting out of its deal with Guba or whether his
company is attractive to Hollywood.
"Sony is going to want multiple distribution channels,"
McInerney said. "Buying a company is an easy way to do it.
They get a user base, they get talent, and they get