Veoh Video Files For Chapter 7

With YouTube dominating the online video market and ongoing legal pressures in an uncertain economic climate, Veoh calls it quits.

Antone Gonsalves, Contributor

February 12, 2010

3 Min Read

Online video sharing site Veoh Networks has filed for bankruptcy protection, blaming the economic recession and a two-year legal battle with major record company Universal Music Group.

Launched in September 2005, the Internet video pioneer grew to a business with a run rate of $12 million and an audience of more than 28 million users per month. Nevertheless, its financial success and $70 million in capital from investors such as Intel, Time Warner, and Goldman Sachs were not enough.

"Unfortunately, great vision, a passionate team, tens of millions of users, millions in revenues and victory in court were not enough," Dmitry Shapiro, founder and chief executive of Veoh, said on the company's blog late Thursday. "The distraction of the legal battles, and the challenges of the broader macro-economic climate have led to our Chapter 7 bankruptcy."

Veoh's end comes despite it success in battling Universal. In September 2009, a federal judge tossed out the music company's copyright-infringement suit, ruling that Veoh had met the requirements of the Digital Millennium Copyright Act in trying to keep illegally uploaded material off the site. Universal maintains Veoh hasn't done enough and has appealed the ruling.

In August 2008, Veoh prevailed in a similar case against adult entertainment company Io Group, which sued the site in 2006 for copyright infringement. A federal judge disagreed and dismissed the case, ruling that Veoh had made a good faith effort to remove Io content. During the legal fight, Veoh banned adult content from the site.

Veoh is not the only online video site to face copyright-infringement suits. Google is currently embroiled in a legal battle with Viacom, which filed a $1 billion lawsuit in federal court against YouTube in March 2007. Google acquired YouTube in October 2006.

However, with YouTube dominating the online video market, Veoh and other Web video providers have had to slug it out for what's left. Other online video startups that have fallen include Instant Media.

In addition, entertainment companies have formed their own video sites, making it even more difficult for companies like Veoh to survive. One such company is Hulu, a joint venture of News Corp. and NBC Universal, owned by Comcast.

Analysts have predicted that only a handful of companies will succeed in building a viable business around Web video. Even Google has acknowledge that it's still looking for a business model to turn YouTube's success into a major revenue source.

Despite Veoh's end, Shapiro said he plans to remain in the game.

"This chapter of our lives has come to an end, but a bright new chapter will soon begin, and I assure all of you reading this, that we have lots of important work ahead of us," he wrote on his blog. "Stay tuned, you will hear from us again!"

As of Friday, Veoh remained live on the Web. Shapiro did not say when the site would be taken down or what would become of its content. Under Chapter 7 of the federal federal bankruptcy code, Veoh may liquidate its assets.

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