A kid doesn't have to have been sexually touched by anyone else to videotape his penis. My son took a photo of his penis (not realizing all his iPad photos go onto his dad's phone. Big surprise for Daddy at work) and he hasn't been molested. Kids are interested in their own genitals, even at age 5, and the other kid who egged him into it is possibly more interested than he should be.
What you should tell your son is that what he does for his own private reasons that never leaves home is fine, but photographs of himself or his body parts without clothes are never to be given to other people, or sent online, or made available to be seen by someone else.
Videos of nude children are considered child pornography. Possession of these videos can be construed as child sexual abuse. What AnnieBrooke says above is good advice, but the video should be deleted and/or destroyed. Under no circumstances should he photograph and/or video himself nude. If he was urged by another child, how old was this other child? I would not rule out sexual abuse entirely. I am dealing with my own issue of sexual abuse that occurred between an 8 year old and a 6 year old. My research indicates that child on child sexual abuse is a far bigger problem than most people know.