News Corp Considering Sale or Spinoff of Ailing Myspace

By Tracey E. Schelmetic January 14, 2011

News Corp. is reportedly considering a sale or possible spin-off of its ailing social networking company, Myspace, which it purchased back in 2005 for $580 million. These rumors come just a day after Myspace laid off 500 employees, or about 47 percent of its workforce, in an “attempt to return to profitability.”

Myspace (once styled “MySpace”) was, once upon a time, the most popular social networking site in the U.S. and a credible competitor to Facebook. According to comScore, however, Myspace was overtaken internationally by Facebook in April 2008 based on monthly unique visitors, and interest in the service has waned dramatically since then. The company already laid off 30 percent of its workforce in June 2009.

Since News Corp. purchased Myspace, the site has struggled to remain competitive (and changed senior management several times). In the meantime, Facebook's popularity has soared worldwide. Myspace had 54.4 million unique U.S. visitors in November, down 15 percent from a year ago, according to comScore. Advertising spending on Myspace was expected to decline 37 percent last year to $347 million, according to research firm eMarketer.

According to Bloomberg, Mike Jones, the Internet unit’s chief executive officer, told employees of plans for the site’s future at a companywide meeting yesterday, Rosabel Tao, a spokeswoman for Beverly Hills, Calif.-based Myspace, said in an interview.

“News Corp. is assessing a number of possibilities including a sale, a merger and a spinout,” Tao said. “The process has just started.”

The announcement signals News Corp.’s unwillingness to bear the unit’s continuing losses, which amounted to less than $100 million in the year ended in June, an official for the site told Bloomberg in October. In addition to the layoff, Myspace recently underwent a site redesign to focus on entertainment and target younger users who may want to avoid the social networking sites their parents and older relatives are using (Facebook, generally).

News Corp., based in New York, fell five cents to $14.36 at 4 PM EST in Nasdaq trading. The Class A shares gained 6.4 percent last year.

If it decides on a spinoff, News Corp. plans to help fund the business, and Myspace employees would be eligible for shares in the independent company, said Bloomberg's sources, two people who attended Jones’s meeting. The talks with News Corp. are still preliminary, Jones told staff, according to the people, who asked for anonymity because the meeting was private.

News Corp. wants to bring in partners to help MySpace work in a more entrepreneurial fashion, according to another person familiar with the spinoff plans.

Tracey Schelmetic is a contributing editor for TechZone360. To read more of Tracey's articles, please visit her columnist page.

Edited by Jaclyn Allard

TechZone360 Contributor

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