GoFish, a digital media company that focuses on content geared towards children, teenagers, and their parents, has raised a $22.5 million funding round led by Panorama Capital, Rustic Canyon Partners, and Rembrandt Venture Partners. As part of the deal, Michael Jung, Mark Menell, and Richard Ling (from Panorama, Rustic Canyon, and Rembrandt respectively) will join the company’s board of directors.

The company says that it now has a reach of 69 million unique vistors worldwide, with nearly a third of that coming from the United States. Included in GoFish’s publisher network are sites like WeeWorld, MiniClip, and Piczo (you can see a full list here). To get a sampling of some of the videos available, you can conduct a search at the company’s consumer facing site.

The company plans to use the money to continue growth and expansion, as well as to settle its debt (details below):

Under the terms of the financing, the investors have committed to invest $22.5 million with an option to invest an additional $2.5 million over the next few weeks. The investors will purchase newly created Series A Preferred Stock convertible at a per common share equivalent price of $0.20 per share. The investors also will receive warrants to purchase common stock at $0.20 per share.

GoFish will use a portion of the proceeds to repay all of its outstanding debt and to cancel outstanding warrants.

In connection with the repayment of the company’s debt, holders of 36% of the company’s outstanding convertible debt have elected to convert their debt into Series A Preferred Stock. The holders of the company’s subordinated debt converted all of their debt into Series A Preferred Stock and exchanged their common stock warrants into common stock at a ratio of one share of common stock for every 10 warrant shares. Holders of an additional 11% of the company’s convertible senior debt have the option to convert their debt into Series A Preferred Stock in the next few days.

Assuming the investment of $22.5 million and conversion of 36% of the company’s outstanding convertible debt (and excluding any conversion by holders of the additional 11% of the company’s convertible debt into Series A Preferred Stock), the company will issue Series A Preferred Stock convertible into approximately 152 million shares of common stock, approximately 3.6 million shares of common stock and issue warrants to purchase approximately 61 million shares of common stock.

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Viacom obviously wants to strengthen the hand of other video Websites against Youtube by spreading its videos everywhere except on YouTube. Viacom has a $1 billion lawsuit against YouTube for copyright infringement and yanked its videos from the site last year. As Comedy Central’s own Jon Stewart said last night regarding his parent company’s lawsuit against YouTube, “A billion dollars? What are they four-year olds?”

I’ve embedded the clip below (which is mostly about the Hollywood writer’s strike) from The Daily Show’s Website. The comment is about four minutes in:

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GoFish had initially celebrated the acquisition in their April 10KSB report as increasing distribution for their “made for internet” (MFI) video shows. The combined sites were expected to draw 7 million monthly unique visitors in the U.S. and roughly 14 million globally (according to Comscore Media Metrix).

The deal was expected to close in May 2007. The stalling deal was most likely responsible for the precipitous drop in their share price in June. The drop saw the company’s market cap shrink from $134 million to about $15 million. The acquisition eventually fell through due to alleged licensing concerns.

GoFish has also experienced other problems. Sources close to the company have reported a major ad network stopped serving ads on the site last month due to the low volume of monetizeable traffic. Over two months, the network saw their total ad spending drop to $20 a day at a $1 cpm. This infers 20,000 unique visitors per day seeing advertisements on GoFish.com. The lack of advertising inventory on the front page was cited as a possible reason for the low numbers.

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Full length copies of well known TV shows and/or movies are readily available on a number of YouTube competitors. Watch, for example, The Office on DailyMotion, Scrubs on GoFish, or SouthPark on Veoh (update: GoFish and Veoh have apparently removed the shows I linked to).

And if searching for the shows on these sites is just too much work, there are other sites that aggregate and organize this content, and embed it on their own sites. Watch any episode from any of the 11 seasons of SouthPark on Allsp.com. And new site VideoHybrid is in a class of its own, with dozens of full length movies and virtually every popular TV show. VideoHybrid even gives statistics showing exactly how many times copyrights have been violated.

Its not clear if the MPAA and networks just aren’t focusing on these smaller video sharing sites yet, or if DMCA notices are simply being ignored. These sites aren’t hiding out and trying to evade the law – they’re funded by well known venture capitalists and, in Veoh’s case, copyright holders. And GoFish is actually a public company.

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The settlement was for “several millions of dollars” in cash, stock and advertising credits – presumably much less than the original demand from Universal of $150,000 per infraction.

The acquiring company GoFish, not to be confused with the wildly successful singles’ site PlentyofFish, has recently seen a huge spike in traffic. It was at 1.4 million monthly unique visitors as of December but reports more than 6 million uniques last month. Bolt sees more than 5 million unique visitors monthly (according to Comscore) and turned that traffic into $7 million in revenue last year. GoFish has reported no revenue but has deeper pockets. It was given birth to by Palo Alto investment firm Global Asset Capital.

Universal Music sued both Bolt and the already Sony acquired Grouper in October for hosting copyrighted music videos (our coverage). The next month, Universal sued MySpace, alleging that the practice of transcoding video uploaded by users represented participation in copyright violation. The Times reports tonight that no settlement talks are underway between Newscorp or Sony. Some people believe these cases will test the Safe Harbor provision of the DMCA, which is believed to shield websites from liability as long as they remove copyrighted content on request. That’s been the standard defense among media hosting companies for the past year, but it’s faced little scrutiny in courts.

Bolt’s CEO said tonight that the acquisition is “economically painful to Bolt shareholders,” but that the legal situation demanded it. It would be great if Sony and Newscorp could come to an amiable resolution with Universal that was good for all parties, video consumers included. Universal signed a deal with YouTube, just prior to the Google acquisition, but that deal may rest in part on the unfulfilled promised of automatic copyright detection technology at YouTube.

Bolt and GoFish both say now that they plan on using technology to detect copyrighted music as well. Presuming those promises mean anything, you have to wonder how much money, time and creativity will go to waste trying to develop that elusive means of content control. The story of Bolt’s acquisition may well be a story of an entrepreneur’s dream strangled while DRM takes its own last breaths. (Note: MySpace rolled out today what it says is effective filtering for copyrighted video.)

Liz Gannes at NewTeeVee reports that the Bolt CEO now plans on moving into the content creation business, as video sharing technology is no longer an interesting business. While you can understand why he’d say that, this seems to me like a sad end to the story. If it’s a part of market maturation, though, things could certainly be worse. I wouldn’t be surprised to see some interesting things come out of GoFish and Bolt in the future.

Marshall Kirkpatrick is the Director of Content at SplashCast and will be assisting with TechCrunch while Michael Arrington travels.

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