SAN FRANCISCO/NEW YORK – Sony Corp.'s entertainment unit said it had agreed to pay $65 million to buy Web video-watching site Grouper.com, marking the growing embrace of the user-generated video craze by big media.
Sausalito, California-based Grouper is one of a number of Web start-ups operating in the shadow of YouTube.com — the most popular destination for user-generated videos, which plays host to an average 100 million video showings a day.
Grouper has attracted a following of millions of its own fans not just as passive viewers of Web-based videos but also as creators of their own videos, which can in turn be shared by users or downloaded to portable video-playing devices.
The acquisition by Sony Pictures Entertainment, the Hollywood movie and television production unit of Japan's Sony (SNE), aims to infuse the studios with new ideas and talent for movies, television shows and games, a top executive said.
Michael Lynton, Sony Pictures chairman and chief executive, said in an interview that user-generated content as a complement to professionally produced media has been a hot topic within Sony's different businesses for more than a year.
"I think user-generated content and the sites around [them] are businesses or platforms unto themselves in the same way that television networks [are]," Lynton said. "There is a big piece of the entertainment/media business this touches."
Sites like Grouper give big media companies like Sony a ready-made network to deliver both Hollywood produced content and niche-market consumer-created videos using viral distribution where users share favorite items with friends.
Unlike Walt Disney Co. (DIS) with ABC, News Corp. (NWS) and Fox, General Electric Co.'s (GE) NBC Universal or CBS (CBS), Sony does not own a broadcast network. So it does not have a direct distribution outlet for movie and television.
In effect, Grouper becomes an online talent audition for Sony. And while Sony might feature promotional movie trailers on Grouper, the site also gives the media conglomerate access to hundreds of thousands of consumer-generated clips, which can be mixed with copyrighted movies and TV that Sony produces.
"Just as News Corp buying MySpace gave social-networking legitimacy," said Allen Weiner, an analyst with market research firm Gartner Inc. (IT), "this is a deal that adds huge legitimacy to the consumer-generated media space."
"It's easier for them to buy rather than to build at this point," Weiner said of media giants' moves to partner or acquire other Internet video start-ups, which beside YouTube and Grouper also include companies like Blinkx and Guba.com.
No immediate changes are planned for the Grouper.com site (http://www.grouper.com), Lynton said, although over time Sony may develop ad-supported and premium content businesses — Hollywood jargon for selling video episodes online.
While Grouper will retain its current management and work within Sony Pictures, the acquisition also fits with several other Sony business arms, including its consumer electronics and video gaming groups.
Grouper videos can be downloaded to connected devices like Apple Computer Inc.'s (AAPL) iPod music and video players and Sony's own popular PSP handheld gaming and Internet device.
Grouper's backers include T-Ventures, the investment arm of Germany's T-Online, and DAG Ventures, which recently led a $10 million financing round for Friendster.
In May, Grouper.com said it had surpassed 8 million unique visitors to the site.