News Corp. is likely to unload struggling social networking site MySpace within the next two days at a much lower sale price than it had originally hoped, sources close to the situation told All Things Digital, a News Corp.-owned technology site. The report was later validated by the Associated Press and the Wall Street Journal, which is also owned by News Corp.
The two frontrunners for MySpace are said to be online ad firm Specific Media and private equity group Golden Gate Capital. Others still in the mix include an Austin Ventures-backed investor group that includes MySpace co-founder Chris DeWolfe and private equity firm Criterion Capital Partners.
From all indications, News Corp. won't receive the $100 million that it originally targeted for the once-popular social media site. All Things Digital's Kara Swisher says that the prospective buyers are talking about a $20 to $30 million offer, which would mark a massive loss for News Corp. The media conglomerate acquired MySpace for $580 million in 2005 before seeing the site get crushed by rival Facebook.
As part of any deal, News Corp. will look to significantly cut costs and MySpace staff members. The impending layoffs could affect as many as half of current MySpace employees. The move would come just six months after the site made considerable job cuts to reduce costs and streamline its new business model, which revolves more around entertainment than social networking.
MySpace continued to lose money even after cutting around 500 jobs in January. The News Corp. business unit that controls MySpace lost $165 million in the quarter ending in March, according to the AP. The unit actually lost more than it did in the previous year's quarter due to sharp declines in advertising revenue. MySpace saw its user base fall to 74 million in May, a 32 percent drop from the previous year.
News Corp. is said to be looking to sell MySpace by Thursday, the last day of its fiscal year.
Beecher Tuttle is a TechZone360 contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.
Edited by Rich Steeves
