When Guba’s CEO resigned, he said that YouTube had won the game in online video… we said that the times would get harder for second tier sites because Google would not be able to make YouTube even stronger. VC activity in the space slowed down, as exits became less obvious. Today we’re seeing the fragmentation of online video file sharing services: Veoh is moving into one area and Sony becomes the latest to carve a niche:
Sony is trying to edge into Internet videos with a Web site to be introduced today called Crackle that will feature short segments by aspiring filmmakers, many of whom Sony paid for their productions.
Crackle is the latest incarnation of Grouper, a Web site that began as a way for people to share music, photos and videos with friends. It transformed itself into a YouTube clone and was bought last August by Sony Pictures Entertainment for $65 million. At the time, Sony said Grouper would be focused mainly on user-created video, which it hoped would spur the use of its home video equipment.
But this approach had little traction in the market. There was a lot of competition, especially from Google’s YouTube, which has become the center of user-created videos. Moreover, Sony found that advertisers did not find user video very appealing.
So it decided that higher-quality videos would enable it to stand out in the market and attract advertisers as well. “We have been moving away from YouTvand toward higher-quality content,” said Josh Feltzer, the founder of Grouper who is now co-president of Crackle, “by rewarding the aspiring producer versus the person who wants to share a video of a wedding or of someone jumping off a roof.”
We wish Sony well, but having paid $65M for Grouper which is a rounding error for the Japanese-based giant, Sony has a lot of wiggle room. The writing on the wall for smaller, privately held assets is less rosy: Revver too sought to be a place for aspiring filmmakers, even offering to share in the ad revenue it generated.
We’re not sure how much traction Revver had, as manifested by the management shakedown late in 2006, and since YouTube has begun paying its content owners too, I doubt many content owners will find a need to be on Revver, Crackle, etc., because market leaders tend to offer more upside to content owners alone than the sum of laggards do in aggregate. Of course, YouTube does not ask for exclusivity, so there is nothing stopping a content owner to allow both Revver, Crackle and YouTube to host their videos in exchange for content.
But as we can see, the time to invest in platforms and infrastructure is long over, for sure the contest continues, but to win, you need content. That’s the next great area of focus… we at WatchMojo.com sort of saw this coming a year ago and that is why we invested aggressively in building a library of high quality, low cost video clips. We syndicate our content across a plethora of distrubution points… but over time, as we too have to manage our resources, it’s natural to think that the only file sharing sites that will get content are those who yield solid returns: be it in audience or in revenue. Branding doesn’t pay the bills, of course, but it does build brand equity which over time is required to generate advertising revenue on our site. So if you follow that rationale, ultimately the file sharing sites that will be relevant will be those who can generate ad revenue for their content partners.
For services like Grouper/Crackle and YouTube, that are now part of a larger entitry, this gives them an edge in that devoid of such revenues, they can survive and thrive to some extent.
But, I do anticipate a further shakedown for independent and privately held file sharing sites that need to start showing their investors a glimpse of a path to profitablity, let alone an exit strategy.
Digg this Blog
Share on Facebook
WatchMojo on Twitter
WatchMojo on YouTube
Add to Favorites
WatchMojo Newsletter
