Grouper Goes Hollywood

Grouper's completely scrapping their old site and being reborn as
Crackle. The new site aims to discover the top online video talent for
their parent company, Sony, by offering producers the chance at fame
and fortune. All the old Grouper accounts will be transferred to
Crackle.

The new property will be a destination video site, consisting of 12
branded channels for different show concepts such as comedy, music
news, and animation. The site consists of a channel guide and high
quality 16 x 9 embeddable video player. Advertisers will be able to
place 5 to 15 second ads between the videos and banner units on the
site.

Crackle's Branded Channels

Crackle will seed the channels 1000 of their own professionally
produced videos. They will add the top user generated content
following the channel's show concept (comedy, music, etc.) as selected
by the community and their team of editors.

In return, Crackle will reward the producers in varying degrees,
ranging from revenue shares to mid seven figure production deals. All
winners will receive distribution across Sony's network of hardware
and film properties. Sony's distribution network and 60 person
advertising team really pushes this open studio model beyond anything
other video startups can currently offer.

The site is launching with 4 of the 12 user supported channels.
Judgment Day is a channel where the hosts will "judge" other people in
the public and then find out if their judgments are right. Scrambler
is a video music magazine for indie rock. High Wire is a virtual stage
for stang up comedy. Wet Paint is an animation channel. They also have
a channel devoted to America's Firehouses, whose content will be
paired with Sony's "Rescue Me" series. Finally, Moving Targets is a
sketch variety channel coming soon.

Rewarding Producers

Crackle will allow users to climb the "fame pyramid" as pictured on
the right. Anyone will be able to submit a video to the channels,
which will be put into a general video library. Viewers will vote for
the best videos and during contest periods for special deals, the two
top user selected videos will join the editors picks to be chosen for
production deals.

The possible rewards for producers will vary based on the channel. All
the chosen content will be distributed across their network of
embedded video players, along with Sony PSP, Bravia, and Sony Vaio.
Crackle claims an audience of 25 million unique visitors per month.

Quarterly winners of their Shorts and Moving Targets channels will get
a pitch meeting with Columbia Pictures about deals produce more
videos. Winners on the comedy channels will get the chance to perform
on stage at the IMPROV comedy clubs in LA, NY, or Chicago and pitch
their shorts to IMPROV Comedy Lab. Animation winners will get a cash
prize, the chance to pitch the studio on a theatrical release of their
short, and tickets to Siggraph 2008.

Their first example is Mr. Deity, a comedy show produced by Brian
Dalton, which Grouper lured from YouTube with the promise of greater
distribution. Since March, the show's 10 episodes have received over
5.7 million views. Sony has picked up the show for an additional 10
episodes to premiere on their Moving Targets channel.

How Does it Stack Up

Crackle is a big shift from the plans originally announced after
Grouper turned down a $10 million second round and sold to Sony last
August. We reported Sony would use Grouper's technology to share lower
quality Sony videos online, distribute DVD quality video by P2P and
allow users to create mashups of select Sony media properties. Both of
these ideas were very similar to what Veoh and Eyespot are already
doing.

YouTube can still drive more traffic to your videos (this one did over
1 million in a day) and make you famous. However, Crackle has what no
other video network has, Sony, which means they can offers top
producers access to fatter budgets along with Hollywood style fame.

It is a model that can be reproduced with some effort by other sites.
iFilm, with it's parent Viacom, could similarly strike deals with top
producers and distribute across their properties. Other social video
sites like Veoh, with their P2P player, Joost and Babelgum, while
lacking Sony's clout, could also step into the ring. Increased
competition for top content from all of these sites spells good news
for the burgeoning internet video industry and may mean bad news for
existing video content networks that can't match what Sony has to
offer.