News Corp. Sends the MySpace Band Packing
Jun 30, 2011 9:48 AM PT
Specific Media announced Wednesday that the company, in partnership with recording artist Justin Timberlake, will buy MySpace from News Corp. in hopes of revitalizing the ailing social networking site.
The rumored price is around US$35 million to $40 million, less than a tenth of the $580 million News Corp. paid for the social network in 2005. That was before Facebook grew and took the social networking crown for itself. Since then, MySpace users and profits have dropped significantly.
In February, Rupert Murdoch's media conglomerate said it was looking for a sale by the end of June and was hoping for around $100 million. That steeper price tag may have been wishful thinking.
"I think News Corp. management was sick of watching MySpace lose money every quarter and decided to cut its losses and took the best offer it could get," Michael Corty, equity analyst at Morningstar, told the E-Commerce Times.
Despite the relatively meager rumored sale price, unloading MySpace may have been a smart decision for the media corporation.
"We're glad to see them selling MySpace, that was cash flow driving over a company. Whether they could turn around the company or not was going to take years to see. This sale improves overall financials. It's tough to be a distant second in many tech spaces," Thomas Eagan, analyst at Collins Stewart, told the E-Commerce Times.
Can MySpace Make a Comeback?
Timberlake's role in the MySpace acquisition came as something of a surprise. It seems he's not just there for the name, either. The music star, who has worked on business ventures including clothing lines, tequila brands, golf courses and mobile application development projects, will be crucial in business development and strategy, according to Specific Media.
The inevitable "bringing sexy back" questions accompany Timberlake's foray into social networking. It's unclear whether anyone, former teen idol turned award-winning artist and producer included, has enough power and vision to turn MySpace into the networking leader it once was.
"Overall, MySpace is just the latest AOL -- remember when they were 'too big to fail?' AOL even bought Time-Warner at the height of the craze. This rise and fall will happen to all site-based social networks ... even Facebook, one day," Valdis Krebs, social networking analyst at Orgnet, told the E-Commerce Times.
Still, the potential development of MySpace into the leading music-sharing site could give the network a leg up against competition.
Fans need a place to interact with their favorite entertainers, watch videos, share new music and connect with one another, Timberlake said.
Timberlake's involvement seems to be to place an emphasis on MySpace becoming a forum for new entertainers to introduce their music and gain followers. The site aims to become a digital destination for original entertainment content such as shows, video and music.
Helping MySpace to carve itself a niche such as music-sharing in the social network marketplace could give it an edge over the likes of Facebook. There, a more broad sense of sharing to "friends," who may not share music tastes or likes, can crowd and overwhelm the site.
Building a Social Networking From a Base
Another detail that could set MySpace apart going forward is its part ownership by a company specifically suited to blend the world of social networking with advertising and cross-channel distribution.
Other networks, such as Facebook and LinkedIn, are social networking in and of themselves, but MySpace going forward will already have the infrastructure in place to blend content and connectivity.
"It could be they're looking for the data as much as MySpace can provide them as much as looking at the financials. They may not necessarily be looking to create a profit as they are looking to use that information, " Eagan said.
Whether or not Specific Media can use that to its advantage will remain to be seen, but News Corp. and other media companies have learned it's crucial to success to have something solid in place while evaluating acquisitions.
"Like other media conglomerates like Time Warner and Disney, News Corp. has not been successful in marking acquisitions of Internet-based companies. I think the company will be more cautious about buying young companies that don't have an established competitive advantage," Corty said.