Sony to grab Grouper for $65m

Sony, which has struggled to piece together a winning web strategy, has acquired video-sharing site Grouper for $65m, the companies are expected to announce today.

Grouper is eighth largest among the companies that host user-generated videos on their websites, according to statistics provided in May by traffic-tracking company Hitwise.

Online video is white hot and analysts have predicted 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 $580m last year and he's already made his initial investment back.

Earlier this month, Google agreed to pay him $900m 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 aren't interested in selling but that hasn't stopped observers from guessing on the company's worth. The guesses have ranged from $500m to $1bn.

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.

Bajarin said: "Connect [Sony's digital music site] has been horrible. They definitely need an iTunes' equivalent. What they are likely going to want is to capitalise 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.

Sony Pictures CEO Michael Lynton said in a statement: "Many people in the Grouper community use Sony cameras to create videos and Sony Vaio computers. 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 one per cent of the video-sharing market share, compared with YouTube's 43 per cent share, Hitwise reported. Visitors to YouTube spend more than 13 minutes on the site, while Grouper's users hang around for just over five minutes.

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 attractive?

Competitors in the sector number more than 200. Among those companies that made Hitwise's top 10 in market share, few are standalone businesses. Besides YouTube, some of the other video sites that have attracted attention are Dailymotion, Guba, Heavy.com, Metacafe and Revver.

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.

McInerney said: "Sony is going to want multiple distribution channels. Buying a company is an easy way to do it. They get a user base, they get talent, and they get technology."

Greg Sandoval writes for CNET News.com