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Sony reeling in Netco

Conglom catches Grouper

Sony Pictures is the latest entertainment conglom to jump into the Internet acquisition game, scooping up online video company Grouper for $65 million.

While it draws relatively low traffic compared with online video biggies like YouTube and Viacom’s iFilm, Grouper uses an advanced peer-to-peer application for sharing videos that clearly impressed Sony.

Deal immediately gives Sony, which has been less active than other congloms in developing or acquiring its own Web properties, a significant presence in Internet video distribution.

Sony Pictures already sells its movies online through several partners including Movielink, CinemaNow and Guba.

But SPE topper Michael Lynton said that while Grouper will work with the conglom’s many divisions, the main purpose of the acquisition is to give Sony a presence in user-generated video.

“It’s not necessarily to promote or integrate our content,” he said. “We like the space and we like Grouper.”

In the short run, Grouper is expected to continue operations out of its Northern California offices as is. CEO Josh Felser will report to Sony exec VP of digital distribution Sean Carey.

Netco will remain focused on distributing user-generated video, but it is also expected to add premium content from Sony and other partners that may be sold or supported by ads.

Going forward, Grouper is expected to develop its technology to distribute and protect Sony Pictures content, as well as work well with Sony Electronics devices.

Previous attempts to connect Sony content and electronics, most notably the Connect online musicstore, have fared poorly.

Grouper could also give Sony a way to distribute video content through broadband Internet connections directly to a TV.

“Getting certain kinds of video off of a PC and onto a TV is a critical path for Grouper,” Felser said. “It doesn’t all belong there, but a large segment of video makes sense on a TV.”

Deal marks Sony’s first acquisition of an Internet company and the first time any entertainment conglom has integrated a Netco into its movie studio operations. Viacom has put its many acquisitions under MTV Networks, while News Corp. started a separate division, Fox Interactive Media.

During the first dot-com boom, Sony invested in a number of Internet businesses of its own.

It created online moviestore Movielink, now owned by five major studios. It also launched now-defunct video mixing site Screenblast and soap opera portal SoapCity.

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