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Photobucket, which just launched new and enhanced video editing features, is reporting that the photos and videos hosted by Photobucket have been blocked by MySpace. This has now happened for the second time, with a similar incident taking place in January 2007. On that occasion MySpace`s response was that they were merely trying out a new filter to prevent security breaches on MySpace. The blockage was imposed at around 10:30 PM Pacific Time, and is really serious.

This sort of blocking has become a regular behavior at MySpace, and they usually lay the blame on security issues, terms of service violations or other such crap. MySpace has previously shut down all Flash widgets in January for a couple of hours, then blocked Imeem, and after that permanently blocked Vidilife, Stickam and Revver. No matter what the reason MySpace assigns, the blockage really hits the startups hard. Revver is struggling for its mere existence ever since the ban.

Photobucket has responded by saying that MySpace is treating its users as a commodity and asking the users to take the battle to the keyboards. Where as MySpace has issued a statement on the issue clarifying their position:

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.

On a related note HitWise Intelligence has published a report stating that Photobucket is the World´s largest Entertainment and Photosharing service with a market share of 41.40% and has grown by 113% in the last year (see chart below). Reports are also coming in that Photobucket has hired an M&A expert to work out on a possible acquisition, and is seeking around $300 million or more.

I personally think that Photobucket got over ambitious and in order to show some great revenue numbers to potential suitors violated the fragile TOS of MySpace.