Peter Kafka

Recent Posts by Peter Kafka

Exclusive: Here's a Deal That Is Happening–AOL Buying Web Video Distributor 5Min

Here’s a deal we can confirm: AOL is buying Web video start-up 5Min Media.

The price for the deal is between $50 million and $65 million, sources close to the situation said. AOL (AOL) plans to announce the deal Tuesday morning. UPDATE: Here’s the press release.

5Min has raised some $13 million in three years, and last spring CEO Ran Harnevo told me he was being offered the chance to raise more money at very attractive valuations.

The deal is at least part of AOL’s secret video strategy–the one that CEO Tim Armstrong acknowledged, but wouldn’t disclose–earlier this month.

5Min is a video middleman: It takes video clips that other people make and distributes them to other people’s Web sites. It says it has a library of 200,000 clips that generate 110 million views a month across 800 partner sites.

The videos come from people you’ve never heard of, and those you have, including CBS (CBS), Hearst and Scripps Networks. 5Min isn’t focused on getting the clips on Google’s (GOOG) YouTube–it’s trying to strike deals with conventional publishers that don’t have video, but would like some.

I don’t know whether 5Min’s deals allow it to retain distribution rights if it gets acquired, but I’m guessing that they do. Otherwise, 5Min is a much less attractive acquisition.

But in any case, you can see how the company would fit together with StudioNow, the video-creation platform AOL bought for $36.5 million earlier this year.

The first deal gives AOL a way to make lots of videos at low cost; the second gives it the ability to distribute those clips widely. At the right price, it’s not a head-scratcher.

No comment from AOL. I’ve left messages for Harnevo, who can be seen in the video below:

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work