Why Murdoch Really Bought MySpace?

32 Comments

He is planning to create a competitor to MTV. Much like Viacom’s CBS decided to use the broadband web to bypass cable and compete against the 24-hour news networks like CNN and FoxNews.

Guest Post by Robert Young

There has been much speculation and analyses as to why Rupert Murdoch acquired MySpace. The prevailing consensus seems to be that News Corp’s motivation was to buy ad inventory targeted at the social network’s valuable young demographic (e.g. see John Battelle’s comments.) That’s overtly simplistic. Moreover, it’s very difficult to justify a $580 million cash payment on that basis alone.

Although ad inventory was surely part of the equation, I believe there is larger strategic reason that motivated Murdoch to make such a bold move: He is planning to create a competitor to MTV.

Much like Viacom’s CBS decided to use the broadband web to bypass cable and compete against the 24-hour news networks like CNN and FoxNews (see PaidContent’s coverage here), the acquisition of MySpace positions Murdoch to challenge the dominance of MTV in their category. I’m willing to bet that he will go even further by eventually extending the MySpace brand to include a dedicated cable & satellite network/channel. He is after all an old media guy.

In fact, just a couple of weeks before News Corp. announced the deal, we all witnessed the web’s potential in this context when AOL’s webcasting audience for Live 8 outreached MTV and ABC’s ratings of the same event (details here.) Such a data point can go a long way towards justifying a $580 million price tag.

In addition to live concerts, MySpace is an ideal platform to release music videos (which the major record labels are desperately trying to monetize), as well as other short-form reality programming (think Fox’s “American Idol”) that’s likely to attract the 22 million youngsters in the MySpace community… an audience that happens to also watch MTV.

No matter what you may think of Rupert Murdoch, he never overpays and you can’t underestimate his brilliance. After all, he challenged the 3 major TV broadcast networks by creating Fox, then he challenged CNN by launching FoxNews, and he’s currently revamping FX with a slate of edgy original programming to go against HBO. I believe he’s now going after MTV, and if indeed that was his reason for buying MySpace, not only was it another brilliant move by the media mogul, but the price he paid was a bargain.

Robert Young is a serial entrepreneur who’s currently focused on Weed (www.weedshare.com), a digital music service and P2P superdistribution pioneer. During Internet 1.0, he orchestrated the sale of Delphi Internet Services to Rupert Murdoch’s News Corp.

32 Comments

pop

Basically the blame wil always fall on sumone, they blame crimes on anyhting that will cut the blame the person who actually commits the crime, they say they had a tough time growing up, abused, etc. And now they say sex crimes and what not that take place online are the cause of myspace and other related cites, myspace is public domain, anything u post on ur site u can expect to be seen by many, many people. But it is the predators that use this in a negative way, and they will, so if ur stupid enough to post all ur personal info, then ur just adding that extra risk to an already existent one

RaT48

If people are stupid enought to put that amount of information on there my space then I’m not surprised that stuff happenes. I laugh at those people.

Julia

“MySpace” is a terrible name, especially if there is to be a cable channel in the works. Hell, even “Facebook” is an improvement, but that would be a terrible TV channel name as well. Good luck with that one, News Corp.
That’s right.

myspace

Rumor has it that myspace is coming out with a better version of there site on another domain starting march 1st it will be another social networking site with extra features more i guess to stay ahead of tagworld also i heard it will be http://www.FriendWise.com i guess well just have to see if that happens.

lop

A couple comments. First, I would argue that you have to look at the acquisition of MySpace of indicative of how deeply Murdoch gets the importance of user-generated content as a generational macro trend.
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Om Malik on Broadband : » Sex, Crimes, and MySpace

[…] Robert Young is a serial entrepreneur. He was an exec at Delphi Internet Services (which he sold to Rupert Murdoch’s News Corp.), and founder/ceo of Freemark Communications. His past columns for GigaOM.com include Inherent truths and value of Community; Why Murdoch Bought MySpace and Murdoch, WiMax and the Two Way Web.. […]

Om Malik on Broadband : » Friendster, Still Looking 4 A Hook-Up

[…] Metaphorically speaking, its efforts to find a special friend have not amounted to much. It has been quite well known that the company which has had its fair share of upheavals has been on the block. And that is when VCs are ready to buy a piece of TheFacebook at a ridiculous valuation, and “OG” Murdoch spent over $500 million for MySpace. […]

Om Malik : » Rupert Murdoch speaks

[…] In this nice little talk about blogs, and power of the community, there is the underlying truth: its about the advertising. The ad-dollars shifting away from traditional forms of media to newer mediums, it behooves News Corp to adapt. (That is precisely the reason I firmly believe that AOL should remain part of Time Warner, despite losing 300 users an hour, and if necessary, selling a piece to Comcast and getting some broadband traction is the best option for TW, than say teeming up with others seeking short term page view pop!) Anyone can buy what they want, shop where they want, talk to anybody in the world that they want (and) state their own opinions. There’s no mystery to a blog: Put up your thoughts (and) find friends….there are lots and lots of communities, and they can all blog — they can all write in a personal diary every week, or whatever they want. There are three very large Internet companies: America Online, which delivers data, which is really what’s keeping them very strong; everyone in the world goes to Yahoo! to do their e-mail, and search with Google. I think online, it’s the search for groupings, identifying search for groupings and providing sites for that — to meet, talk, discuss. These are very interesting; there are huge numbers of people. (We’re going to be) learning a lot about them and then selling advertising to them. Not too obtrusively, but when you target, there’s no waste: 50,000 people over here or 5 million people over there. […]

Om Malik’s Broadband Blog — » Murdoch’s Broadband Plans

[…] A few weeks ago, Rupert Murdoch’s satellite TV operator BSkyB shocked everyone when the company acquired Easynet for $373 million. No one was expecting the media giant to make a move into the high speed Internet access market, even though his acquisitions of MySpace and IGN for an estimated $1.2 billion did indicate his seriousness about the Internet. Now Reuters’ is reporting that he is considering a similar move in the US. “Here (in the United States), we don’t know,” Murdoch told the newspaper. “We may be forming a company with partners to build something out here that would give you broadband.” […]

Om Malik’s Broadband Blog — » Bigger Than Google, MySpace is different

[…] Robert Young, earlier this year, explained to my readers why Rupert Murdoch really bought MySpace for $583 million. He argued that we should wait for Rupert to launch a record label and a music channel that takes on MTV and knocks it off its top spot. Well today, both those things happened. Young has decided to update story, and has written a stirring post, that reminds Murdoch’s men to not get blinded by the Hollywood Bright Lights, or else they ruin the carefully woven fabric of My Space community. This is not the first time he has argued for handling the community with velvet gloves. […]

Nikki

The purchase of pointcast was DEFINITELY overpaying. Its very obvious now. But MySpace ont he other hand….

marc calderwood

Changing the name of a vehicle that is as successful as My Space would be a huge mistake. An entire generation is buying in on this name …. just mention it to anyone under 25 and a few of us in our 50’s and we’ll know. In a marketing environtment that speaks in new language (Skype just to name one) better get used to seeing business’ marketing their groove by the use of unfamiliar names.

Mike

Hey, yeah, I checked out myspace but I like this better..

If anyone wants to go check it out, do it up. It’s not affiliated with myspace whatsoever.. Murdoch can’t get his icy fingers around you at their site

Mark Sigal

A couple comments. First, I would argue that you have to look at the acquisition of MySpace of indicative of how deeply Murdoch gets the importance of user-generated content as a generational macro trend.

Social networking as a trend bucket is as much a reflection of consumers really enjoying pimping themselves up through customization and personalization and building affinity networks around that process, as it is about “collecting friends.”

Two, I believe that Murdoch gets that when you marry user generated engagement with rich media, you have a model for lock in and leverage since users increasingly have a common reference point for maintaining conversations and communal connections with their peers, which becomes a defensible “space” since it is so context-bound.

A couple links. One is a post I wrote on user generated content: http://thenetworkgarden.com/weblog/2005/08/the_user_create.html.

The other is is good article in Businessweek called The Birth of Murdoch.com: http://www.businessweek.com/technology/content/aug2005/tc20050816_5029_tc024.htm?campaign_id=rss_techn

Jeremy Pepper

Not sure if the purchase of Pointcast would have been overpaying. Think of how many people loved Pointcast, and how it could be used nowadays as a cool RSS reader, or content delivery system for such an MTV/Fuse type channel on MySpace.

I agree that it would be an odd name for a channel, but it isn’t much worse than Current.

Ypulse

Ypulse Essentials

Free the ‘Brats’ (an L.A. Times, reg. required, writer accuses ABC’s brat camp of teensploitation…I also keep reading news stories about teens on the show getting in more trouble…) – Help is in your hand (or your thumb. Ypulse reader…

The Stalwart

A Rival To MTV

Speculating on the reasons that News Corp (NYSE: NWS) bought out Intermix (AMX: MIX), with their hot social networking website, My Space. Robert Young speculates that Murdoch Co., may be preparing to launch a competitor to MTV, owned of course,

Dan

He almost overpaid on Pointcast. Idealab was just too wrapped-up in the bubble mindset of the time to accept the offer.

The Indiana Jones School of Management

Why Rupert Murdoch Bought MySpace

Robert Young thinks that Rupert Murdoch bought MySpace in an effort to compete with MTV in the new media space. I’m not entirely sure that I buy Young’s argument, but it’s compelling. Short-form programming is definitely here on th…

msteinbaugh

If this is the case, which does make sense, the new entity needs a different name. “MySpace” is a terrible name, especially if there is to be a cable channel in the works. Hell, even “Facebook” is an improvement, but that would be a terrible TV channel name as well. Good luck with that one, News Corp.

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