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

medlaw

“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.

The Best

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?

CAT

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.

Gus

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

Willard

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.

Lindsey Ruffolo

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.

Mini-Me

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

myspace music video

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.

myspace codes

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.

myspace

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.

Anonymous

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

Ticketwood

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.

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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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.

Dan

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

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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