Online Video Site Veoh Filing Chapter 7 Bankruptcy

Veoh is an online video site that was at the forefront of television and user-produced media viewing on the internet. But a legion of viewers and a visionary team could not save the company from filing chapter 7 bankruptcy recently, according to PC Magazine.

Veoh’s top executive and founder cited legal conflicts and the flagging economy as reasons for the company’s bankruptcy filing. But the company’s problems were similar to those of many video sites, including YouTube, which has also struggled to earn revenue.

The Veoh Web site, which debuted in 2005, features videos from both professional and non-professional sources. Videos from users are side-by-side with established television shows and movies like “The Love Boat” and “Night of the Living Dead”.

In a note to the public, Veoh founder Dmitry Shapiro described the legal entanglements that formed part of the reason for Veoh’s Chapter 7 bankruptcy.

Several years ago, Veoh was sued by Universal Music Group, which is, according to Shapiro, the largest music company in the world. The lawsuit alleged copyright infringement on the part of Veoh. Shapiro described UMG’s lawsuit as “a relentless war of attrition against us in federal court.”

A California judge threw out the copyright infringement case, meaning that Veoh had won the lawsuit in what Shapiro called “a decisive summary judgment that set an important precedent for the entire industry.” He cited the legal battle as a distraction from the core business goals, however. That, coupled with the poor economic climate, led the company to file Chapter 7 bankruptcy.

This was not the first time that Veoh faced a complicated legal situation. A year before, Veoh won another lawsuit against an adult entertainment company that had claimed copyright infringement. The company was more aggressive than the typical copyright situation, and instead of sending a warning the company sued Veoh. Veoh won the case.

Despite their victories in the legal cases, Veoh as a company was not able to recover from the distractions that they caused. In the first half of 2009, Veoh laid off 25 employees and stated their commitment to a web browser plug-in that the company had developed.

The re-focus, however, did not salvage the company, despite around $70 million in investment from companies that included Intel, Time Warner and Goldman Sachs.

Founder Shapiro was adamant in his statement about Veoh’s innovative achievements, saying, “we grew our passionate audience base to over 28 million users per month, built a business with a run rate of $12 million, and helped educate many blue chip advertisers about the bright future that online video holds for them.”

The Veoh site is still live, and there is no particular date when the site will go down. The Chapter 7 of Veoh comes close on the heels of the downfall of another online video site, Joost, which was launched by the founders of the online telephone service Skype.

In his statement, Shapiro acknowledged his team and his investors, saying “We built an amazing team of people that put in countless hours, with great passion in our pursuit of changing the world, and were fortunate to have dedicated, visionary investors that supported us with $70 million and many strategic opportunities.

“I would like to thank all of my fellow team members and their families, our courageous, dedicated investors, our suppliers and attorneys, and all of the passionate people that have made it possible for us to be a part of this great revolution of social media.”