• Media Memo et al., Friday, February 12, 2010 12:57 PM

Despite the rise of online video, the backing of Michael Eisner, the support of major TV networks and video-sharing platforms, top-tier executive leadership, and millions of dollars in funding, Web TV startup Veoh is toast. So what happened?

"Veoh, which started as [a] YouTube-style site, has struggled for years to find a business model that works and has burned through $70 million in funding from name-brand investors like Goldman Sachs, Time Warner, Intel's venture arm, Spark Capital and former Disney CEO Michael Eisner," writes MediaMemo.

Calling the ill-fated startup a "YouTube-wannabe," TechDirt says Veoh "never got very much actual traction... and got tangled up in a lawsuit with Universal Music pretty quickly over alleged copyright infringement, despite Veoh abiding by the DMCA."

Veoh CEO Dmitry Shapiro told MediaMemo's Peter Kafka that despite winning the copyright lawsuit against Universal, the case "was both financially draining and distracting ... because everybody we talked to was terrified of getting sued immediately."

Shapiro later wrote in an open letter on his personal blog: "The distraction of the legal battles, and the challenges of the broader macro-economic climate have led to our Chapter 7 bankruptcy."

Put another way, "Another start-up has succumbed to the chokehold of a music studio," writes The Wall Street Journal's Venture Capital Dispatch blog.

However, echoing remarks by Kafka, the Venture Capital Dispatch blog doesn't buy the idea that Veoh would have succeeded where it not for Universal. "Its sales weren't high enough to justify the expenses ... Perhaps Universal was the final blow, but Veoh set itself up for the kill."

Shapiro said the site had 28 million users per month and was on a "run rate" of $12 million, apparently referring to the company's revenue.

"However, a company's run rate is not the same as its actual revenue," PC World writes. "A run rate takes a company's actual revenue and growth over a given period and uses these figures to forecast what revenue for an entire year.

Still, how could such a well-funded video startup fall flat in the face of soaring online video consumption?

Well, "Although online video use has continued to grow robustly through the recession, the actual dollars going into the space remain small," notes PaidContent.

Moreover, writes NewTeeVee, "It never reached the same scale as YouTube, which was bought by Google in 2006, and it had a hard time differentiating itself against other video aggregators."

Read the whole story at Media Memo et al. »