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Summary:

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 […]

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.

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  1. 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.

  2. The Indiana Jones School of Management Saturday, August 6, 2005

    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…

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

  4. Search Engine Journal » Rupert Murdoch’s MySpace To Challenge MTV? Sunday, August 7, 2005

    [...] and compete against the 24-hour news networks like CNN and FoxNews.” From Young (on Om Malik’s blog): I’m willing to bet that he will go even f [...]

  5. The Stalwart Monday, August 8, 2005

    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,

  6. 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…

  7. Jeremy Pepper Monday, August 8, 2005

    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.

  8. Om Malik’s Broadband Blog » Murdoch, WiMAX and The Two Way Web Saturday, August 13, 2005

    [...] e he will use his acquisition of MySpace to compete against MTV head on, as I speculated in my previous post here ). By integrating content and distribution, Murdoch has built a [...]

  9. Market Talk » Blog Archive » Musikmarketing auf myspace.com Tuesday, August 16, 2005

    [...] annt zu haben. Gerade für Independent Labels ein interessanter Kanal. Es scheint an dem Gerücht, dass Fox mit dem Kauf von Intermix Media, dem Betreiber von MySpace.com, eine [...]

  10. Market Talk » Blog Archive » Musikmarketing auf myspace.com Tuesday, August 16, 2005

    [...] annt zu haben. Gerade für Independent Labels ein interessanter Kanal. Es scheint an dem Gerücht, dass Fox mit dem Kauf von Intermix Media, dem Betreiber von MySpace.com, eine [...]

  11. Market Talk » Blog Archive » Musikmarketing auf myspace.com Tuesday, August 16, 2005

    [...] annt zu haben. Gerade für Independent Labels ein interessanter Kanal. Es scheint an dem Gerücht, dass Fox mit dem Kauf von Intermix Media, dem Betreiber von MySpace.com, eine [...]

  12. Om Malik’s Broadband Blog » Secret Life of My Space Sunday, August 28, 2005

    [...] enomenon, MySpace is as important, if not more important, than MTV.” Oh didn’t Robert Young say that, like a month ago? In Asides Posted Sunday, August 28, [...]

  13. Om Malik’s Broadband Blog » Secret Life of My Space Sunday, August 28, 2005

    [...] enomenon, MySpace is as important, if not more important, than MTV.” Oh didn’t Robert Young say that, like a month ago? Still a pretty interesting look at how MySpace [...]

  14. 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

  15. 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

  16. marc calderwood Monday, September 12, 2005

    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.

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

  18. is that the same Bob Young as in Sociologist at Large?

  19. Om Malik’s Broadband Blog — » MySpace Records, out now Thursday, November 3, 2005

    [...] As predicted, MySpace.com creates own record label. Is the music channel next? [...]

  20. Om Malik’s Broadband Blog — » Bigger Than Google, MySpace is different Friday, November 4, 2005

    [...] 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. [...]

  21. Om Malik’s Broadband Blog — » Murdoch’s Broadband Plans Monday, November 7, 2005

    [...] 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.” [...]

  22. Om Malik : » Rupert Murdoch speaks Wednesday, November 16, 2005

    [...] 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. [...]

  23. Om Malik on Broadband : » Friendster, Still Looking 4 A Hook-Up Wednesday, January 11, 2006

    [...] 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. [...]

  24. Om Malik on Broadband : » Sex, Crimes, and MySpace Monday, February 6, 2006

    [...] 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.. [...]

  25. 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.
    .

  26. MySpace Generation vs. MTV generation at PodSori Sunday, February 12, 2006

    [...] the acquisition of MySpace positions Murdoch to challenge the dominance of MTV in their category [Why Murdoch Really Bought MySpace?] [...]

  27. 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.

  28. “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.

  29. 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.

  30. 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

  31. 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 ticket. 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 tickets a lot about them and then selling advertising to them.

  32. Rumor has it that http://www.friendsnest.com is coming out with a better version august 20th

  33. with 50 million eyes of the world on your profile it’s really hard to believe that someone would give out personal information on the net…it’s realllly easy to track someone with a little bit of info

  34. Ruppert murdoch got a bargain by buying myspace not that it’s generating as much money that he paid for the social networking site. But he will make other money from what he uses those members for like a myspace music channel etc.

  35. I heard that myspace want to compete with mtv in the same market and music artist will be able to charge what they like for downloading there music.

  36. myspace music video Monday, January 22, 2007

    Ho-ho! 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.

  37. Rumor has it that Friendsnest.com is coming out with a better version March 22, 2007

  38. The primary reason for this purchase is in his deluded mindset is that he can target the youth of America, and create a whole generation of GOP mini-hitlers.
    This man is a very twisted, and evil man, with a very sick, twisted agenda. He too stupid to realize that its a global network, and mostly middle class (what little bit exist today because of urchins like him). And most teens do something that he has never done in his life, or any other GOP member for that matter; that is think for them self. IMHO

  39. Lindsey Ruffolo Tuesday, April 3, 2007

    Rupert Murdoch’s investment in MYSPACE was a savvy business move. Everyday MYSPACE attracts an estimated 240,000 new members. With the resurgance of online media in the late 1990’s, the business world transformed, and by 2003 MYSPACE creators Tom Anderson and Chris DeWolfe developed the idea for a major networking site, which could connect millions of people.
    TUrning MYSPACE in to a more advanced and engaging source for news and live broadcasts, Murdoch would capitalize on an already thriving marketing website. People today rely on fast information that is constantly at their fingertips, and using MYSPACE as a new, hip way to communicate with people would most likely create a way for Rupert Murdoch to turn a profit.
    MYSPACE has become a cultural phenomena, that doesn’t seem to be going anywhere soon. It gives each person a chance to express themselves, find information on their favorite movies/bands, and a place to find exclusive advertisements. MYSPACE was a smart investment for Rupert Murdoch, and i’m very intrigued to see what the future holds for the company and for the public.

  40. GigaOM » What if Redstone ‘Googled’ Murdoch? Thursday, April 19, 2007

    [...] bitter after Murdoch outfoxed Redstone in the bid to buy MySpace nearly two years ago. Given that MySpace has proven to be the next MTV, it’s no secret that Redstone took it all pretty [...]

  41. What if Redstone “Googled” Murdoch? » Publishing 2.0 Thursday, April 19, 2007

    [...] bitter after Murdoch outfoxed Redstone in the bid to buy MySpace nearly two years ago. Given that MySpace has proven to be the next MTV, it’s no secret that Redstone took it all pretty [...]

  42. Wal-mart: Surpassing (or usurping?) a government near you. at Get a Faceful Monday, April 30, 2007

    [...] trash MySpace (well-deserved) they should realize that MySpace sold out long before it hit China – literally. I wonder if he realizes every time he goes shopping in the United States, he is selling out to [...]

  43. Murdoch purchased myspace to compete with this that or the other, this way thinking is so irresponsible it befuddles me.

    Murdoch is trying to steer young people over to the wonders and greatness of the republican party, you can see this in his previous attempts to compete with the Steven Colbert, and John Stewart show’s on comedy central, with that huge turd that aired 3 or 4 times they called the 1/2 hour news hour on faux news.

    Rupert is aiming at a demographic, the young people of the united states in order to try to expand the GOP base, and churn out the next generation of goose stepping, jackboot wearing fascists. Thats all. Nothing more.

  44. I know it’s kind of off topic, but THE MEDIAM have a song called “RUPERT MURDOCH”. You can listen to it at themediam.com or myspace.com/themediam

  45. Sind Communities einfach Commodities? « Sprechblase Wednesday, May 30, 2007

    [...] Höchstens in der Masse als Commodity Asset wie mySpace oder ähnliches. So wie Murdoch sie gekauft hatte [...]

  46. As we see today, $580 million isn’t biggest amount paid for huge web project.

  47. Michael Raich » Blog Archive » Musikmarketing auf myspace.com Wednesday, July 25, 2007

    [...] scheint an dem Gerücht, dass Fox mit dem Kauf von Intermix Media, dem Betreiber von MySpace.com, eine neue Konkurrenz zu [...]

  48. Youth Ministry in a MySpace World « Confessions of a Human Being Saturday, August 18, 2007

    [...] bit heavy-handed there, eh? Especially since Tom does not own MySpace anymore (Rupert Murdoch bought it a little while ago). And the one preceding it, a bold lie. Just because I choose not to forward on [...]

  49. Social Network Platforms & APIs: Why are developers putting all of their eggs in one basket? Thursday, October 11, 2007

    [...] years ago, MySpace was all the rage. Remember the hype after Newscorp acquired MySpace? Rupert was hailed as a genius by the blogosphere and everyone was asking “how can we reach the MySpace [...]

  50. money blog » Why Facebook is no threat to Google Wednesday, October 17, 2007

    [...] predator being busted for posting a profile there? I’m still wondering if Rupert Murdoch is secretly kicking himself over that one. Another question mark in my brain centers around Facebook founder Mark Zuckerberg, [...]

  51. Top 20 Internet Millionaires Under 30 – Rap GodFathers Community Wednesday, January 9, 2008

    [...] well i was never to fond of it any way whod he sell it to and why is it not on the list? Why Murdoch Really Bought MySpace? – GigaOM [...]

  52. Failing Social Networks « Digital Claxon Thursday, April 3, 2008

    [...] what I posted on my wall because only people in my network had the ability to view my profile. Once MySpace sold to Rupert Murdoch for half a billion dollars, Zuckerberg got greedy and Facebook changed from a simple site used to keep in touch with your [...]

  53. This analysis from 2005 sure makes sense in the past context.
    Right now in 2008 Murdoch was said to be offering MySpace to Yahoo or at least stronger collaboration similar to those with Google.

    Being entirely based on Microsoft .NET (for those who didn’t know it;-) the partnership of what’s one of the biggest MS .NET sites in the world with archrival Google makes it a curious form of Mash Up Hybrid,

    Certainly if Murdoch offered MySpace to Microsoft it sounded far more logical.
    At least it’s technology they understand ;-)

    However, Google’s clever stakes in all these companies (Yahoo, MySpace, AOL) makes it almost impossible for each of them to become 100% perfect targets for Ballmer & Co.
    Bill Gates and Paul Allen may have beaten many competitors like AOL/Netscape, Novell or Apple in the past, but many of their former players are now tending to outsmart his successor Steve Ballmer on more than just one front.
    Murdoch only plays a minor role, but at least he’s a kind of Joker for both sides.

  54. Murdoch and MySpace.. « Mel Scammell Tuesday, October 28, 2008

    [...] this nice little piece by Robert Young on gigaom.com (‘Why Murdoch Really Bought MySpace?’), it seems he wants to get into the music game by creating an MTV3, if you will: In [...]

  55. Digging Those MySpace Add Ons – Buzzsonic.com Saturday, December 27, 2008

    [...] MySpace Backlash (Wired.com) Feb. 27 2006 Users Crowd Into MySpace (BusinessWeek.com) Nov. 15 2005 Why Murdoch Really Bought MySpace? (GigaOm.com) Aug.6 2005 Bookmark This [...]

  56. Rubert Bought Myspace for 580 million dollars

  57. With MySpace Changes, a Social Networking Era Ends Thursday, April 23, 2009

    [...] cohort President Tom Anderson. DeWolfe ran the company from 2003, helped sell it to News Corp., for $580 million in 2005 and later help negotiate $900 million advertising deal with Google. Since then, MySpace has lost [...]

  58. Well, hindsight is 20/20 and this was written long ago. But I think we see now, given that facebook has taken over myspace, that the myspace purchase may not have been one of Rupert’s best plays. No?

  59. Snarkasm « Cinie’s World Thursday, August 6, 2009

    [...] the CEOs of two big corporations that own shit like money losing MySpace, Fox News, NBC, and the Pretendident make a pact, reported in the news, to get their on-air [...]

  60. Imitation and Obsolescence – Facebook Guns for Twitter | Convince & Convert Feed | Online Marketing Connect Thursday, September 24, 2009

    [...] a reported $500 million. Not bad to be sure, but far less than YouTube’s $1.65 billion, or MySpace’s $580 million (in 2005 dollars). Regardless of the soundness of their perceived self-worth, Twitter rejected [...]

  61. After Being Out Foxed On The Web, MySpace May Do An About Face(book) | Sunday, November 1, 2009

    [...] owned by Rupert Murdoch’s News Corporation. No one can seriously believe that when  Murdoch paid $600 million dollars for MySpace four years ago he expected MySpace to so quickly fall out off the [...]

  62. “No matter what you may think of Rupert Murdoch, he never overpays”
    Yes, Rupert looked brilliant in 2005 … until he moved out of his core business (newspapers and television) onto the web. This article does a good job of explaining why myspace makes little sense from a business standpoint as an adjunct to a media company.
    http://www.wired.com/wired/archive/14.07/murdoch.html

    I see myspace recently laid off 400 employees.
    http://www.nytimes.com/2009/06/17/technology/companies/17myspace.html?_r=1

    Rupert’s recent comments about delisting from google have exposed him as utterly uninformed about the web and how it interacts with news / media companies.

  63. but why did he purposely ruin myspace is the question, they made every bit of navigation very hard to deal with, took out every short cute even the lite view tab at the top now u have to backtrack to click it, alot of links are gone. then made the privacy horrible by exposing every single move anyone does to the entire friendlist. then copied facebook even though myspace users who liked myspace for itself hate facebook.

  64. MySpace Said To Be On Life Support | The Executive Whisper Tuesday, December 28, 2010

    [...] only was it another brilliant move by the media mogul, but the price he paid was a bargain,” wrote, um, notable smart guy Om Malik in August, 2005. (See, nobody really knows what the hell is going to happen [...]

  65. The Perils of the Prediction Game: Tech News « Wednesday, December 29, 2010

    [...] sometimes analysis and its value changes depending on when you look. For example, in 2005, we said Myspace was a good acquisition by News Corp. It was a way to go-up against MTV. At $580 million, it was a bargain. A $900 million-plus [...]

  66. Staggering level of fawning for a media mogul who epitomizes everything that is wrong in freedom of news management. However, it just goes to show how wrong we can be. Myspace who?

  67. We all remember what happened when the government (Murdoch) got their hands into Myspace. http://t.co/jLsS9TKk #bs #facebook #corrupt #lies

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