Wall Street Journal
February 7, 2011
By EMILY STEEL And RUSSELL ADAMS
News Corp. has hired Allen & Co. to advise on "possible deal opportunities for Myspace," the investment bank said.
News Corp. executives are holding informal talks about a handful of options. In one scenario, News Corp. would combine Myspace with another site, possibly in gaming or social networking, in exchange for cash and equity in the merged company, the people said. Executives also have talked to private-equity and venture-capital firms about taking over the business and setting aside stakes for News Corp. and employees of the reorganized site, the people said.
News Corp. and Myspace said no formal discussions with investment or acquisition partners have been held.
News Corp. Chief Operating Officer Chase Carey said last week that the company hopes to reach a decision on Myspace in the first half. He said partners in the U.S. and abroad have expressed interest and that an outright sale is one option.
Talks with potential partners began in November after Mr. Carey said the site was running out of time to stem losses. Myspace Chief Executive Mike Jones and Jonathan Miller, News Corp.'s chief digital officer, subsequently concluded that Myspace could attract more talent and have better financial prospects as an independent Internet company, according to the people familiar with the matter. Mr. Carey then gave his blessing to pursue informal talks regarding some sort of deal involving the site, the people said.
Mr. Jones in November had conversations with people in the industry about the site, according to a person familiar with the matter. Some of those people began to consider an investment but decided against it, the person said.
A Myspace spokeswoman said, "All interested parties are directed through a single process managed by our bankers, who have just recently been retained."
Another possibility is a partnership with a gaming company, according to the people familiar with the matter. They said News Corp. is interested in the revenue potential of online games and see Myspace as a gateway to avid game players.
That could be difficult, however. In December, only 4.4 million of the site's 50.1 million unique visitors used Myspace's games section, according to comScore Inc.
An investor who had spoken to Myspace said the company likely would be valued in the tens of millions of dollars. Others said it was too preliminary to estimate a price. News Corp., which also owns The Wall Street Journal, paid $580 million to buy Myspace in 2005.
Myspace's traffic continued to decline after the site last autumn shifted its focus to entertainment from social networking. Myspace's December traffic of 50.1 million visitors was down 27% from a year earlier, according to comScore. Myspace executives said the decision in January to cut the company's roughly 1,000-person work force in half put the site on a fast track toward profitability.
The day employees were told about the latest round of job cuts, Mr. Jones touted the early success of the autumn revamp as an entertainment hub. Myspace has seen an "uptick in returning and new users," with more than 3.3 million new profiles created since the relaunch, he wrote in a memo to employees.
For the quarter ended Dec. 31, the News Corp. segment that includes Myspace reported an operating loss of $156 million, $31 million deeper than the segment's year-earlier loss. News Corp. blamed the wider loss mostly on lower search and advertising revenues at Myspace.
I related to this article a lot because the first social networking site that I had was on Myspace. With the new picture "The Social Network" up for countless movie awards, it is safe to say that social networking is on the rise. However Facebook seems to have a monopoly on the industry. It will be interesting to see if Myspace merging with another company will be enough to revamp the website and make it as visited as it once was.
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