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Sony Pictures Entertainment has become the latest traditional media company to plunge into the new media arena with the $65m acquisition of Grouper, an internet company that specialises in user-generated video.

Grouper has just 8m unique users, far fewer than rivals such as YouTube, the largest internet video aggregator. However, that figure has grown from 1m in March. The company also boasts a video-sharing technology that allows users to post Grouper-created videos on other social networking sites, such as MySpace or Friendster, expanding its potential reach.

Michael Lynton, chief executive of Sony Pictures, said the studio saw a number of possible uses for Grouper, from distributing and promoting its films and television programmes on the internet to serving as a pipeline of new ideas and creative talent.

“Consumers are spending more and more time on sites such as Grouper, and as one of the world’s largest creators of entertainment, we want to be where the audiences are,” Mr Lynton said.

He also argued that Grouper overlaps with Sony Pictures’ consumer electronics parent company. Visitors to the site, for example, frequently use Sony cameras and computers to help create and edit their videos.

The deal offered the latest indication that traditional media companies are rushing to gain a foothold in new internet-based forms of entertainment that have quickly built young audiences.

News Corp last year paid $580m for MySpace, a social networking site that now has more than 100m registered users. Since then, Viacom and NBC have also made big-ticket acquisitions with Xfire and iVillage and IAC last week joined the frenzy by taking a majority stake in College Humor.

While the sites have generated heavy traffic, it is still unclear whether their new corporate owners will be able to translate that into robust advertising sales.

In addition to their racy content, such sites have also generated concerns among traditional media companies because their users tend to violate copyright laws by cutting and pasting music videos and other content at will.

Mr Lynton said Sony was still at an early stage in deciding how to collaborate with Grouper, and that he would need to consult individual filmmakers before deciding whether their works should be released onto the site.

Josh Felser, Grouper’s founder, will stay with the company, and said the Sony deal offered a unique opportunity to create a site with both user-generated and copyrighted content. Mr Felser sold another internet startup, Spinner.com, to AOL for $320m in 1999.

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