Analysis: Sony Goes Online for Offline Talent?

Authored by Jay Baage on July 16, 2007 - 5:34am.

The online video site formerly known as Grouper — the one purchased by Sony for $65 million last August — is being rebranded as Crackle - a Sony Pictures-backed online talent studio. It seems like just about everyone else is doing something similar these days – from Metacafe and Funny or Die to 60 Frames – so what is the winning original concept going to be in this space?

Helped with Sony backing, Crackle will fund production, sign deals with promising artists, and market videos across the web. For example, Sony’s Imageworks studio will work with animators creating videos for Crackle.

Every three months, the best animated video — as selected by users and Crackle editors — will receive a cash prize and fly to LA to pitch Sony executives on a theatrical release, according to VentureBeat.

It seems to me that there is a disconnect here.

If everyone realizes that it is a great idea to go online for talent - have the casting all in the open with input from the audience American Idol style – why is the goal then to take these stars offline?

The answer is that the money is still offline.

These days, it’s hard to build an online video-sharing property with compelling content, and even harder to monetize with advertising, Crackle/Grouper co-founder Josh Felser admitted in a recent interview. The site has grown to 25 million unique visitors in June from 7 million last August, he says, but notes that its ad-based revenue model isn’t a big business.

Even the leader in this space, YouTube, is still experimenting with advertising.

"Unlike YouTube we're not going to have millions of people sharing on our site," said Josh Felser, the president of Crackle. "We're going to take the best people and promote them and syndicate them."

The belief by Crackle that it will be better able to sell advertising on videos that are more professional is unfortunately for them not an original thought, for example Broadcaster.com and Funny or Die are giving the same pitch.

My Take: I’m not sure picking out emerging filmmaking talent rather than the amateur clips is the way to big money in the online video space.

I think two keywords are community and ease-of-use - as of right now anyway.

By ease-of-use I mean that the programming can be transferred to such different viewing environments as XBox 360 and Apple TV.

Grouper served as a P2P network and offered a video editor and Web-based video-sharing service, as well as the ability to post videos to MySpace, Friendster, Blogger and Wordpress as well as download capability to the computer, iPod and Sony PSP.

If Crackle can continue to do this well and build up a big, active community, it is well positioned in a very competitive field when an effective model for monetization of online video eventually emerges.

But even so, will there be enough advertising money to go around? Probably not.

Joakim Baage