SAN FRANCISCO — Sony Pictures Entertainment today is expected to join Hollywood's new-media mash-up by buying online video service Grouper Networks Inc.
With its $65-million acquisition of Grouper, the movie and television unit of Sony Corp. becomes the latest traditional media company to vie for a growing -- and potentially lucrative -- Internet audience that prefers its entertainment short and, often, stupid.
For The Record
Los Angeles Times Saturday August 26, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 63 words Type of Material: Correction
Sony deal for Grouper: An article in Wednesday's Business section about Sony Pictures Entertainment's acquisition of Grouper Networks Inc. said Sony did not have a big ad sales force like Viacom Inc. and News Corp. Sony's ad sales force is smaller than those of Viacom and News Corp., but it is substantial, employing 40 people and generating annual revenue of about $300 million.
Video-sharing sites such as Grouper and category leader YouTube Inc. attract millions of viewers with a smorgasbord of short clips including home video of cuddly puppies, wince-inducing stunts and bootlegged snippets of TV shows and movies.
Grouper draws a fraction of the monthly visitors of YouTube, but analysts said YouTube's price was probably too high to justify the risk. Both companies are privately held.
Although advertisers are expected to spend nearly $17 billion online this year, even the most popular video-sharing sites don't make serious money because advertisers are leery of their messages appearing next to risque or extreme clips. Grouper, which raised $5.5 million in venture capital funding, runs only simple text ads brokered by Google Inc.
Sony said it planned to make minimal changes to Sausalito, Calif.-based Grouper to boost advertising revenue, perhaps by following the lead of YouTube, which on Tuesday announced plans to run video ads.
"It's not as much a way of promoting our movies or television shows as a stand-alone business that has growth opportunities," Sony Pictures Chief Executive Michael Lynton said. "The idea is for Grouper to stand on its own two feet and make money for us."
Unlike Viacom Inc. and News Corp., which have invested heavily in new-media ventures to expand their cable and broadcast TV holdings, Sony doesn't have a big advertising sales force to sell online commercials. Its main goals are to create and distribute movies and TV shows.
"It's a bit of an odd fit, but you can see why Sony would be broadening its portfolio," Jupiter Research analyst David Card said. "Sony can behave like a mogul and maybe cultivate talent. Mostly they're going to try to build an audience and sell ads. That will be a new skill set for them."
Learning new skills has been a sort of mantra at Sony, the Japanese electronics and entertainment giant that changed the rules of consumer technology with innovations such as the Walkman portable music player and the Betamax home video recorder. But its recent efforts have stumbled.
