Sony Lands Grouper and Wades into Murky Content-Sharing Waters

Article ImageSony Pictures' acquisition of video sharing site Grouper Networks in August 2006 marked another significant move in the shakeout of the social media market. The acquisition, valued at $65 million, gives Sony a powerful Web 2.0 marketing and distribution platform for its media properties and offers Grouper's consumer creators direct access to a major media distributor. Of course it remains to be seen how Sony will cope with the digital-rights-management conundrum presented in its ownership of a site where copyright policing is almost entirely performed by users themselves.

Grouper's copresidents, Dave Samuel and Josh Felser, were involved in, one of the earliest sites to offer legal copyrighted music streams. Spinner was sold to AOL in 1999 for $320 million. Grouper, based in Sausalito, California, was founded in 2004 as a P2P file sharing platform. According to Samuel, "By mid-2005 Josh recognized that we needed to focus on a vertical market to be successful, and videos were perfect for our technology." By December of last year, the site had evolved into a public video sharing service.

Grouper's motto is "Watch. Share. Create." and Sony's management cites this access to original user-generated content as one of the main benefits of the acquisition. Michael Lynton, SPE chairman and CEO, also noted, "Many people in the Grouper community use Sony cameras to create videos and Sony VAIO computers and mobile devices to store and view them. It makes sense to complete the circle by having Grouper be a part of Sony Pictures Entertainment." Perhaps most importantly, Grouper gives Sony an online distribution channel for its movie and television properties, complementing the Sony Connect music download service.

The acquisition comes at a time when Grouper's video sharing service has been dwarfed by that of YouTube. According to Alexa's web traffic rankings, YouTube ranked as the 13th most visited site on the web as of September 2006, while Grouper was at position 2,858 that same month. There's no question that having a corporate parent with deep pockets will allow Grouper to invest for a more competitive service. "Users will see more Sony Lands Grouper and Wades into Murky Content-Sharing Waters features, more content, and better service," says Samuel. "There are so many divisions at Sony to partner with, and we are just starting to get a sense of those opportunities."

The next challenge facing Sony will be to address DRM issues inherent with its acquisition of Grouper. According to Gartner analyst Allen Weiner, "Grouper has done a fairly credible job of policing clips to weed out unauthorized videos, but the standard of performance will be much higher now that it is a Sony-owned property." Considering Sony's well publicized efforts to ensure its own digital rights protection, it will have to tread very carefully.

Weiner thinks that Sony may meet this challenge by, ironically, becoming more open. "People generally resort to unauthorized clips only when there is no easy way to access legal ones. So if Sony can rise to the occasion and make more of its own media available to users, it should reduce the need for unauthorized content." Weiner also touches on the implications for users when he says that Sony is likely to keep the Grouper brand intact. "Consumers are inherently resistant to posting their content on big brand-name sites, because they're not 100% certain what will become of it." Sony and Grouper will have to communicate clearly about just what rights the creator retains when posting videos to the Grouper site.

Sony has all the pieces in place to reap the benefits of a viral distribution and sharing site, as long as it applies its standards for DRM as stringently to itself as it has to consumers and competitors.