D'oh! More Homer Simpson on MySpace


News Corp., trying to build an even bigger Web powerhouse, appears closer to allowing Fox video to stream from MySpace users' home pages

News Corp. (NWS) may soon allow members of its MySpace Web site to embed Fox TV shows and other Fox video on their home pages, marking a huge step toward generating greater revenue from the world's largest social networking site. Such a development, described by an industry executive familiar with the matter, would advance News Corp.'s steady march toward online distribution of its content.

Fox already allows MySpace members to view the network's shows streamed at a site within MySpace, www.myspace.com/fox. They can also view shows at News Corp.-owned sites such as www.direct2drive.com and www.fox.com. On Mar. 1, Fox said it would begin allowing people to view or purchase television shows from Web sites operated by Fox's TV affiliates.

An announcement could be made as early as next month, although no date has been set. The feature under consideration would be different because it would allow Fox video to be embedded on tens of millions of MySpace home pages, vastly increasing distribution. Fox Interactive Media (FIM) had 75 million unique visitors in January, 61.5 million of which came from MySpace, according to market researcher comScore Networks.

Putting Fox video on those MySpace pages could be a significant source of revenue for FIM, which is expected to generate about $500 million in sales this year. That would be enormous revenue for a standalone Internet startup. But as a division within News Corp., it's a small part of a $25 billion-plus annual revenue stream.

A spokesman for FIM, the news division that operates MySpace, declined to comment.

Pay-Per-View

By allowing MySpace users to post Fox video on their homepages, News Corp. would instantly create a huge new source of online video advertising inventory. Each time someone played a video on a MySpace page, it would create an opportunity for News Corp. to roll out an advertisement. Considering that MySpace draws more traffic than any other Web site, according to comScore, the economic opportunity could be significant. FIM had 40.4 billion page views in January, 40 billion of which came from MySpace, comScore says. The No. 2 most-visited site, Yahoo! (YHOO), had 35.6 billion page views, followed by Microsoft (MSFT) with 18 billion, Time Warner (TWX) with 16 billion, and Google (GOOG) with 13.7 billion.

Analysts see the decision to allow embedded video as a savvy mix of News Corp.'s entertainment content and enormous Web assets. Moreover, major advertisers have been clamoring for more advertising inventory, especially with such high-traffic sites as MySpace, Yahoo, AOL, and MSN. Demand for video advertising opportunities is high, supply is often tight, and prices are rising. "Video is booming. Advertisers are allocating more money to online video," says Mark Kingdon, chief executive officer of Organic, a digital marketing and advertising agency. Advertisers who want to reserve online video spots at major Web portals often must do so months in advance, says Jeff Lanctot, vice-president of media and client services at Avenue A/Razorfish, a digital marketing and advertising agency owned by aQuantive (AQNT).

Table of Contents

News Corp., which has a unique combination of Internet and media assets, enjoys an excellent position to exploit the growing demand for online video advertising. Other companies such as Time Warner, Viacom (VIA), and Disney (DIS) have deep reserves of content, but none can match MySpace's presence on the Web. And the other large-traffic Internet sites, like Yahoo and Google, lack News Corp.'s vast library of content, which includes popular programs such as 24, The Simpsons, Family Guy, and American Idol.

MySpace remains one of the great growth engines on the Web, confounding predictions that its early success would be destroyed by a major media conglomerate. News Corp. acquired the company for $580 million in 2005 (see BusinessWeek.com, 7/19/05, "News Corp.'s Place in MySpace"). Its unique monthly audience of 61.5 million was up 73% from January, 2006, according to comScore.

MySpace is growing faster than other sites of comparable scale. As of January, MySpace was the sixth-largest site on the Web, measured in terms of users. The leader, Yahoo, had 129 million unique users, but its audience grew only 2%. Time Warner grew 1% to 117 million. Microsoft declined 1% to 115 million. Google grew 21% to 113.4 million, and its YouTube unit grew more than 1,000% to 30.4 million. The No. 5 user site, eBay (EBAY), grew 16% to 80.7 million.

Vast Distribution

Sensing their power, News Corp. and other big media companies are moving more aggressively to wrest power from pure Internet players such as Google and Yahoo. News Corp. struck a marketing agreement with Google last year in a deal that will guarantee it $900 million in revenue. Google turned around a few months later and bought YouTube, which competes with MySpace video (see BusinessWeek.com, 10/16/06, "YouTube vs. MySpace?"). Since then, MySpace has made some waves by forcing YouTube and other companies that use its infrastructure to remove videos that violate copyright laws (see BusinessWeek.com, 10/16/06, "News Corp Beefs Up MySpace Video"). "Big media companies are exercising their muscle pretty significantly," Kingdon says.

News Corp.'s decision to distribute its ads on MySpace home pages reflects a broader trend in media. Until now, much online content has been distributed through major destinations and portals. They won't go away, but in the future, content will increasingly be distributed across large groups, such as user communities or business syndicates. "We are entering an era in which distribution will trump destination," Lanctot says. "By that, I mean media owners in due time will not rely on a single destination site but on broad distribution across many sites."

By using their TV affiliates and online customers to distribute content, big media companies like News Corp. may soon wield a valuable tool as they battle Internet giants such as Google.


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