Sony Pictures Entertainment has acquired Grouper Networks, which provides the Grouper user-generated video site, for $65 million. Traditional media companies are increasingly seeing value in online video services although they have yet to demonstrate a viable business model.

“Consumers are spending more and more time on sites like Grouper, and as one of the world’s largest creators of entertainment, we want to be where the audiences are,” said Michael Lynton, the chairman and chief executive of Sony Pictures Entertainment, a subsidiary of the Sony Corporation.

“Many people in the Grouper community use Sony cameras to create videos and Sony VAIO computers and mobile devices to store and view them,” he said in a statement. “It makes sense to complete the circle by having Grouper be a part of Sony Pictures Entertainment, which itself creates so much content for people around the world.”

“A site like Grouper allows people to showcase their creativity to a vast audience,” he continued. “It’s like a virtual, global audition, and a great source of entertainment.”

Grouper was founded in 2004 by Josh Felser and Dave Samuel, who both previously founded Spinner.com, an early streaming music site which they subsequently sold to AOL for $320 million.

Grouper was originally created as a peer-to-peer platform for sharing videos. The site claims to have over 8 million unique users a month, and over half a million registered members.

Users can browse videos and easily post them to a wide variety of third-party web sites. The Grouper peer-to-peer video sharing network enables downloads of high quality video shared by its members. Users can also edit and upload material and download to portable devices like the Sony PSP.

The acquisition of Grouper prompts renewed speculation about the value of YouTube, which has a far higher profile and market share.

When News Corporation bought MySpace for $580 million, many questioned the value, but it has since been seen as a good buy. In that context, $65 million could be bargain, but some will remain sceptical. At any rate, it is unlikely to be the last acquisition of a community content site by a major media company.

www.sonypictures.com
www.grouper.com