Technology

Murdoch Tightens His Grip on MySpace


Shortly after pushing aside MySpace co-founders DeWolfe and Anderson, News Corp. is turning to Old Media hands to pump up revenues

You may as well call it the Old Media two-step. It has been nearly four years since Rupert Murdoch's News Corp. (NWS) plunked down $580 million to buy social networking behemoth MySpace. But if anyone doubts that Murdoch & Co. firmly intend to put the traditional media stamp on MySpace, just check out the rush of new executives that News Corp. is hustling into MySpace's Beverly Hills headquarters.

MySpace is clearly under the control of some proven Old Media hands, starting with Jonathan Miller, a onetime Nickelodeon executive who once ran TV stations for media mogul Barry Diller's USA Networks (IACI) before heading to run AOL for Time Warner (TWX). It took Miller only three weeks after signing on as head of News Corp.'s digital operations to boot MySpace co-founder Chris DeWolfe on Apr. 22 and more or less consign co-founder Tom Anderson, everyone's "first friend" on MySpace, to some as yet undeclared role within the company.

MySpace is now being run by former Facebook Chief Revenue Officer Owen Van Natta, who on Apr. 27 named two new top executives. That includes onetime MTV top digital executive Jason Hirschhorn, who earlier this year left his job as president of Sling Media, which developed a set-top box that could ship recorded TV shows from a consumer's TV to a laptop. Hirschhorn was named chief product officer. Van Natta also appointed as chief operating officer the experienced Web executive Michael Jones, whose Web-tool outfit Userplane was bought by AOL. Jones replaces Amit Kapur, who left in March.

Coming Up Short

It's probably the media world's worst-kept secret that News Corp. has been chafing for more than a year as MySpace continually seemed to come up short of Murdoch's ambitions as a new distribution outlet for TV, movies, and other content produced by the company's Fox studio. Much of that frustration, say insiders, has been the result of the freedom Murdoch and outgoing News Corp. President Peter Chernin had given DeWolfe and Anderson to run MySpace. In fact, Fox teamed with NBC to launch its year-old Hulu site to stream TV shows rather than to do so through MySpace because of restrictions that MySpace wanted to place on how Hulu would be used by competitor sites, according to some who were close to the decision. MySpace did become a distribution partner for the service.

In a March interview with BusinessWeek, DeWolfe defended the working relationship he and Anderson had with News Corp., calling it "as strong as any relationship in the media world." He said that News Corp. hadn't blocked any plans the two had for the site.

Still, MySpace has failed to hit the $1 billion revenue mark that Murdoch set for the site this year, and will likely come in closer to $900 million, say analysts. Moreover, although it retains a shrinking lead in audience over Facebook in the U.S., MySpace has seen its foreign audience fall well behind that of Facebook internationally, with 126 million unique users to Facebook's 236 million.

Also, while News Corp. has envisioned MySpace as an advertising vehicle to offset the decline in sales for some of its more traditional media outlets, MySpace is still closely wedded to Google (GOOG), whose $250 million in annual ad sales provides more than one-third of MySpace's total ad sales. That deal is scheduled to expire next year, and News Corp. insiders say the site will be hard pressed to find another as lucrative.

Music Site Ahead

Where does that leave MySpace? Already, it has taken steps to create a music site, which currently reaches an estimated 18 million users, and is working on expanding its still small efforts in video gaming. Look for News Corp. to mightily expand both, and to add more originally produced TV shows to the small but growing number that MySpaceTV produces. And there will be plenty of joint promotions between MySpace and other News Corp. properties—say, a promotional spot on the Fox network's American Idol or at halftime of an NFL pro game.

News Corp. isn't making Miller and his team available for interviews just yet. Still, the flurry of press releases announcing some experienced Old Media hands coming aboard clearly means MySpace has suddenly grown up.

Grover is Los Angeles bureau chief for BusinessWeek.

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