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Remember all that controversy about MySpace blocking videos from Photobucket because they had commercials in them that provided no revenue to the News Corp.-owned social-networking site?

Well now MySpace has "solved" the problem ... by buying Photobucket. Valleywag broke the news, and offers this analysis:

What does the deal mean for other startups which have piggybacked on Myspace? On the one hand, it's heartening. For a venture so dependent upon it, Myspace paid a hefty multiple. But Photobucket is the largest of the "widget" makers, ventures which depend on a share of the real estate of larger sites, rather than drawing visitors to their own properties . If even it could not develop an independent advertising business, the prospects of other widget makers are dim.

Photobucket's deal should be cause for celebration for Alex Welch and his partners, and for Trinity Ventures, which invested $10.5m in the company last year. But, for other widget makers, it marks something of a ceiling on their likely exit.

The story was confirmed by TechCrunch, and given a price: $250 million.

From TechCrunch, here are the financials for Photobucket:

Photobucket generated $6.3 million in revenue last year and planned on hitting $25 million or more this year. They have 40 million registered users and add another 85,000 per day. ... They’ve raised $15 million over two rounds of financing.