MySpace Sale Almost Complete (For Real This Time)
News Corp. first revealed it was putting MySpace up for sale back in February of this year, after which the auction process seemed to sort of fizzle in the face of sheer investor indifference. Now the planned MySpace sale is moving forward again, according to rumors, with two companies considered front-runners for eventual ownership: Specific Media, which specializes in "addressable advertising," and Golden Gate Capital, which specializes in investing in bankrupt or distressed companies (MySpace definitely fits the bill).
Reuters also names potential contenders including Myspace co-founder Chris DeWolfe, in partnership with Austin Ventures; Criterion Capital Partners, which bought Bebo from AOL; and Activision Blizzard chief executive officer Bobby Kotick. Regardless of who gets MySpace, rumor has it that News Corp. will lay off up to half of the social network's roughly 500 employees in preparation for the sale.
I have no way of knowing if MySpace will actually be sold sometime today or tomorrow, as news reports suggest, but whenever it sells it is sure to be a black eye for News Corp., which will have to part with MySpace for a lot less than it paid for the social network not so long ago. In July 2005 News Corp. acquired MySpace for $580 million, but here in mid-2011 it will almost certainly end up selling for less than $100 million -- and the price could be as low as $20 million according to All Things Digital.
MySpace indeed proved to be a pretty bum investment for News Corp., whose interactive division (dominated by MySpace) lost $150 million in fiscal 2006, $193 million in 2007, followed by one profitable year (to the tune of $42 million) in 2008, another loss of $212 million in 2009, and yet another loss of $575 million in 2010. In the first three months of 2011 it lost a further $165 million, explaining News Corp's desperation to unload it on someone else.
And I never tire of recalling the misinformed social media triumphalism which accompanied the original acquisition by News Corp. earlier this decade. A year after News Corp. acquired MySpace, Fortune opined that "News Corp.'s purchase of MySpace is looking like that rarest of rarities in the media world -- a much-ballyhooed acquisition where it turns out that the buyer underpaid." Fortune quoted News Corp.'s then second-in-command Peter Chernin exulting, "It looks like the best acquisition we've made in a long, long time. MySpace is the single biggest growth opportunity this company has." In March 2006, CNN noted that MySpace "has 66 million members, and about 250,000 new ones sign up each day. That's a mind-boggling growth trajectory for an Internet site that was launched less than three years ago." After reaching 63 million unique U.S. visitors in December 2006, MySpace has currently declined to about 20 million in May of this year, according to Quantcast.