Bolt Sells to GoFish to Pay Universal Music Settlement

Video sharing site is being acquired by GoFish – a smaller but richer rival, in order to pay the settlement the company has agreed to with Universal Music Group for copyright infringement. The New York Times broke the story tonight. Bolt will go for an estimated $30 million in GoFish stock (update: forms filed Monday indicate that the acquisition was for about half this amount) ; the three year old GoFish was the first video sharing site to go public last October. Though it has just begun to bring in revenue from licensing deals, GoFish stock closed Friday just under $6 per share with a market value of $134 million.

The settlement was for “several millions of dollars” in cash, stock and advertising credits – presumably much less than the original demand from Universal of $150,000 per infraction.

The acquiring company GoFish, not to be confused with the wildly successful singles’ site PlentyofFish, has recently seen a huge spike in traffic. It was at 1.4 million monthly unique visitors as of December but reports more than 6 million uniques last month. Bolt sees more than 5 million unique visitors monthly (according to Comscore) and turned that traffic into $7 million in revenue last year. GoFish has reported no revenue but has deeper pockets. It was given birth to by Palo Alto investment firm Global Asset Capital.

Universal Music sued both Bolt and the already Sony acquired Grouper in October for hosting copyrighted music videos (our coverage). The next month, Universal sued MySpace, alleging that the practice of transcoding video uploaded by users represented participation in copyright violation. The Times reports tonight that no settlement talks are underway between Newscorp or Sony. Some people believe these cases will test the Safe Harbor provision of the DMCA, which is believed to shield websites from liability as long as they remove copyrighted content on request. That’s been the standard defense among media hosting companies for the past year, but it’s faced little scrutiny in courts.

Bolt’s CEO said tonight that the acquisition is “economically painful to Bolt shareholders,” but that the legal situation demanded it. It would be great if Sony and Newscorp could come to an amiable resolution with Universal that was good for all parties, video consumers included. Universal signed a deal with YouTube, just prior to the Google acquisition, but that deal may rest in part on the unfulfilled promised of automatic copyright detection technology at YouTube.

Bolt and GoFish both say now that they plan on using technology to detect copyrighted music as well. Presuming those promises mean anything, you have to wonder how much money, time and creativity will go to waste trying to develop that elusive means of content control. The story of Bolt’s acquisition may well be a story of an entrepreneur’s dream strangled while DRM takes its own last breaths. (Note: MySpace rolled out today what it says is effective filtering for copyrighted video.)

Liz Gannes at NewTeeVee reports that the Bolt CEO now plans on moving into the content creation business, as video sharing technology is no longer an interesting business. While you can understand why he’d say that, this seems to me like a sad end to the story. If it’s a part of market maturation, though, things could certainly be worse. I wouldn’t be surprised to see some interesting things come out of GoFish and Bolt in the future.

Marshall Kirkpatrick is the Director of Content at SplashCast and will be assisting with TechCrunch while Michael Arrington travels.