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DivX, parent company of defunct video-sharing site Stage6, on Tuesday disclosed how it came to the decision to shutter the service rather than to sell.

"Potential copyright litigation" was one of management's top considerations leading up to the shuttering of Stage6, Dan Halvorson, DivX's chief financial officer, said during a conference call to announce the public company's fourth-quarter earnings. There was reason for concern. Turns out DivX, a maker of Internet-video technologies, had lost a bid to avoid fighting costly copyright suits just a few weeks before Stage6 was closed, records show.

Halvorson almost certainly explained the reasoning behind the shutdown because of questions raised by Brad Greenspan, the MySpace co-founder. Greenspan, who operates online entertainment network LiveUniverse, attempted to acquire Stage6's assets last month. When he was rebuffed, he went public.

Greenspan suggested in a press release that DixX managers failed to look out for shareholder interests by choosing to close Stage6 instead of selling.

The controversy illustrates some of the financial and legal risks involved in operating a video-sharing site. YouTube, buoyed by Google cash, can afford to challenge entertainment conglomerates in court. Not everybody else can.

DivX's problems started this way: last fall, Universal Music Group, the largest of the top four labels was making noise about unauthorized copies of its content posted to Stage6. In a bid to head off a lawsuit from the record company, DivX filed first. In September, DivX sued Universal Music to try to win a favorable ruling that Stage6 was not responsible for illegal acts committed by users under the Digital Millennium Copyright Act.

It didn't work.

On February 5, just three weeks before Stage6 went dark, U.S. District Judge Dana Sabraw (PDF) dismissed DivX's action against Universal Music, according to court records. (Blogger Davis Freeberg was first to report the judge's decision.)

Not surprisingly, a month after DivX filed suit against Universal Music, the label responded by filing against DivX. That copyright case still hangs over DivX's head. One interesting side note is that DivX could have bought its way out of the mess. Universal Music offered DivX a chance to license its content for $30 million, according to papers filed with the court. The offer was turned down.

Beyond the legal questions, DivX also said the "significant costs" of running Stage6 was a factor in its closing.

"Our previous indication regarding the cost of running Stage6 remained accurate," Halvorson said in the conference call. "While the traffic to Stage6 did help generate some revenue...the continued operation of the site would take substantial financial investment."

Brad Greenspan, the highly unpredictable MySpace cofounder, continues to go after distressed Web video sites.

Fresh from acquiring troubled video site Revver, Greenspan said in a press release on Friday that he recently made an $11 million bid to acquire video-sharing site Stage6, operated by DivX. The problem is that the DivX board never responded to his offer before simply shutting down Stage6. Greenspan's miffed.

"After LiveUniverse makes its first offer, DivX Board refuses to engage in any direct dialogue with LiveUniverse for over 5 days," according to the release issued by Greenspan's company Live Universe. "During this time, DivX shuts down Stage6...Directors of public companies have a fiduciary duty to shareholders to try to get the best deal and represent their interests, first and foremost."

LiveUniverse, an online network of entertainment sites, said in the statement that DivX continues to rebuff its offers and has yet to state publicly why it's better to shut down the site, which it did last week, rather than accept LiveUniverse's bid.

That bid, which includes $3 million in cash and $5 million in online advertising, is still on the table, according to the announcement. Los Angeles-based LiveUniverse said that if DivX would agree to the terms, it pledged to close the transaction within 72 hours.

Taking the issue public is obviously an attempt to embarrass DivX's board into negotiating. But Greenspan's accusations do highlight some curious decisions made by DivX's administration.

TechCrunch cited unnamed sources last week who said that DivX was recently preparing to spin off Stage6 and had amassed about $24 million in venture funding but "a ridiculous battle of egos at the DivX board level caused most of the team to simply quit."

DivX, a publicly held company that creates and licenses digital-video technologies, said that it closed Stage6 because of cost concerns. Techcrunch reported that the company was paying about $1 million per month for bandwidth. Stage6 offered users the ability to upload high quality video to the Web.

A DivX representative said executives could not comment but would make a statement about their Stage6 decision on Tuesday, when they reports quarterly earnings.

Brad Greenspan, co-founder of MySpace.com and founder of LiveUniverse, an online entertainment network, announced that his company has acquired ailing video-sharing site Revver.

Greenspan said in a statement that he plans to merge the offerings of Revver and LiveVideo.com, his company's social-network and video site. Revver will continue to operate under its own brand.

But the ex-MySpace executive did not pass up the opportunity to take a few swipes at his former company. Greenspan opposed the 2005 sale of MySpace to News Corp. and has badmouthed MySpace and its parent company ever since.

Half of his press release announcing the Revver purchase is dedicated to blaming MySpace for Revver's failure to attract fans.

Greenspan traces Revver's troubles to January 2007, when MySpace blocked access to Revver's video player. MySpace banned Revver because of its policy prohibiting third parties from posting ads on MySpace.

Revver embedded ads within videos and was booted. That's not how Greenspan saw it.

"MySpace had become a predator aggressively blocking and censoring any Web service it deemed competitive," LiveUniverse said in its press release.

Funny thing is, none of the former Revver employees or founders I've spoken to ever link the company's problems to MySpace. They typically talk about of the video-sharing sector.

Terms of the Revver acquisition were not disclosed, but sources familiar with the deal say Revver was sold for pennies on the dollar. Sources told CNET News.com last month that Revver was asking for between $300,000 and $500,000 in cash and the assumption of the company's $1 million debt.

News.com has since learned that Revver's debt was $2.5 million. NewTeeVee, which broke the news of Revver's acquisition, quoted sources who said that Greenspan paid just under $5 million for the troubled company.

Investors had pumped about $13 million into Los Angeles-based Revver since 2005.

Employees of video-sharing site Revver said they breathed a sigh of relief Thursday after management informed them that the company had been acquired by LiveUniverse, a little-known online entertainment network.

Representatives from both companies declined to comment, but two Revver employees and an executive at a company that had inquired about bidding on Revver said managers there had informed them the sale was done. The blog NewTeeVee was first to report the acquisition.

In a report earlier this month, CNET News.com cited sources who said the beleaguered Revver was asking for between $300,000 and $500,000 and the assumption of the company's debt, which the sources said was in the $1 million range. Draper Fisher Jurvetson and Bessemer Venture Partners were among those that invested more than $12 million into Revver.

News.com also reported that talks between LiveUniverse, owned by MySpace.com co-founder Brad Greenspan, had stalled last month over the issue of debt. A Revver employee, who asked to remain anonymous because he is not authorized to speak for the company, confirmed that Thursday.

The employee added that negotiations began to pick up again after the story about Revver's troubles appeared. That triggered, according to the employee, a flurry of inquiries from other companies. Among those who called was VideoJug, an online video destination and production company.

Doug Kamin, senior vice president of marketing at VideoJug, said Thursday that he contacted executives about the possibility of making a bid after reading about Revver's woes.

"At those prices, we thought Revver would be a good deal," Kamin said. "I'm betting lots of others thought the same thing."

On Thursday Revver called Kamin to tell him that Revver's management had decided to go with the "original bidder."

Revver's staff, which is half the size it was in 2006, was ecstatic to hear that the company was saved and that they would not be broken up or moved, according to two Revver employees. The status of the company's CEO, Kevin Wells, was unclear.

For a year, the company had weathered management shake-ups that included the departures of all three founders. Employees had witnessed some of the Web's best-known video producers, such as Ze Frank and Lonelygirl15, abandon the site. Revver's audience was dwarfed by YouTube's and other video-sharing front-runners.

More recently, rumors circulated the Web that the company was running short of cash, according to the Revver employees.

"Everyone is just really happy that this happened," the Revver employee said. "We always knew that the company had great technology and a strong following of creators. We knew we had value."

CNET News.com's Caroline McCarthy contributed to this report.

Revver, a YouTube competitor that made a name for itself by paying video producers, has fallen on hard times.

The company's staff has dwindled to less than half the size it was 18 months ago, according to former employees. Rumors flitter around the Web about whether the company is running out of money. Now comes word that Revver has been trying to sell itself at a fire-sale price for months, according to three sources close to the company.

Revver's asking price is between $300,000 and $500,000, as well as the assumption of the company's debt, which is in the $1 million range, said two sources with knowledge of the negotiations. The sum is tiny considering that the Los Angeles-based Revver raised $12.7 million in venture funding.

The blog Contentinople reported last month that LiveUniverse, a network of entertainment Web sites owned by MySpace founder Brad Greenspan, had agreed to acquire the site.

The deal never materialized. A source with knowledge of the negotiations said talks stalled when Greenspan began "trying to drive down the price" and "that Revver's debt was an issue."

In response to questions from CNET News.com, Angela Gyetvan, Revver's vice president of marketing, said: "I'm not at liberty to discuss any of this with you. I can't comment."

Mark Elfenbein, LiveUniverse's chief operating officer also declined to comment.

Revver gained some notoriety in 2006 when video-sharing became a worldwide craze. YouTube dominated the sector but Revver tried carving out a niche by catering to videographers.

The company, backed by such investors as Draper Fisher Jurvetson, Bessemer Venture Partners, and William Randolph Hearst III, offered to share advertising revenue with makers of the most popular clips. The thinking at the company was that if Revver could win over the best creators, audiences would follow.

That's not what happened. Revver has yet to draw an audience big enough to make it one of the leading video-sharing sites. What it has done well is attract a small but talented group of video producers, the sources said.

"Their (producer) community is loyal to them," said one of the sources. "Otherwise, I don't know that they are worth much."

This is not the first time that Revver has entertained potential buyers. A year ago, News.com reported that representatives from Microsoft's video-sharing site Soapbox had toured Revver's offices on Sunset Boulevard. A source said at the time that Microsoft didn't appear to be interested.