03:45 AM

Did Photobucket violate MySpace terms - or is Fox shutting down parasites?

Photobucket announced yesterday that MySpace is blocking the service's video and remixes from MySpace profiles. This is sending shockwaves through the MySpace widget economy. Widgets like these are completely dependent on being able to feed through MySpace, and if they can't users will abandon in droves.

Robert Scoble says the news will chill investment in "parasitic services."

If you want to avoid these issues there’s really one choice: pay for your site’s own hosting and build your own traffic. One reason to join services like MySpace and Wordpress.com is that there’s a built-in level of traffic — the home page on Wordpress.com regularly drives hundreds, if not thousands of visitors to even new sites every day. If you go off and build your own site you don’t have those advantages, but you’ve got to live with when they pull down parasitic services, which is what Photobucket is.

Fox says there is a very good reason for the move - and that third parties that play by the rules have no reason to worry. (Via Om:

“MySpace allows its users to embed video, slide shows, and other features from third parties so long as they comply with our terms of service. Photobucket recently began running an ad-sponsored slideshow and encouraged users to post these ads in bulletins and profiles throughout the community. We spoke to the company about their actions, but they refused to respect our community’s terms and we had no choice but to disable their service. MySpace does not block third party embeds or services that abide by our terms of use. We support the freedom of expression and creativity of our community and must continue to protect the experience expected by our users.”

Even so, the rules can of course change at any time, or Fox can decide that the party is over.

Regardless of who is to blame, this widget squeeze, if that is indeed the case, exposes the soft underbelly of all these start-ups that have pinned their hopes on the MySpace ecosystem.

Well, it seems like there is a toll to pay to get access to MySpace. Google paid hundreds of millions of dollars to get access to FIM’s playground. It is not surprising to see Rupert’s lieutenants play whack-a-mole with start-ups with little to offer in terms of monetary compensation.

MySpace may simply be laying the groundwork to move their huge base of users to their own video service - or to YouTube, as part of that advertising deal. Notes Dr. Tony Hung:

I think it just goes to show that Rupert Murdoch means Business when it comes to MySpace, and furthermore, isn’t afraid to show that MySpace doesn’t need any external widgets polluting its pool of users with “choices” and the like.

If MySpace has an alternate video storage and management product cooking — which only has to be *just* has good — it will have no problem locking in its users. They’d have to deal with a whole lot of them being cheesed off because all the time that was spent uploading their videos to another service had been lost; but I’m sure there’s lots they could do to sweeten the pot in the meantime.