Blog Post

News Corp.-IGN: Street, Analyst React

Richard Greenfield, analyst, Fulcrum Global Partners: “The big question now centers on what exactly is News Corp.’s overarching ‘vision’ for its newly acquired Internet properties and how well/quickly will it be able to integrate all its Internet pieces.” Greenfield notes the jump in monthly uniques to 24 million with MySpace/Intermix and now to about 70 million. … “While it is unclear whether the IGN deal (similar to the Myspace acquisition) will create value for News Corp. shareholders, it continues to demonstrate News Corp.’s (and particularly Rupert Murdoch’s) willingness to spend capital to build businesses – in this case to address an aspect of News Corp.’s business mix that was largely missing only three months ago. This continues to set News Corp. apart from its media peers. (my emphasis, not his.)
“A primary benefit of this acquisition (beyond driving overall traffic) is in bringing successful Internet entrepreneurs (head of IGN agreed to stay on after the deal closes) into the News Corp. family of businesses that will hopefully be able to leverage News Corp. content, programming and financial resources.”

Jessica Reif Cohen, analyst, Merrill Lynch: “Importantly, we believe that further acquisitions are possible, with NWS expressing particular interest in the search business. … Valuation – maybe you shouldn’t ask. While important strategically, IGN is a relatively young company, and its valuation reflects robust growth prospects. … Furthermore, we believe that NWS should be able to use its considerable media heft to drive additional revenue and margin upside.

Aryeh Bourkoff, analyst, UBS: “While the IGN purchase price is high by traditional media standards, the company is paying for established Internet traffic to what should become a vertically integrated site that includes aggregated News Corp. content. IGN reports 28 million unique users, and the acquisition is expected to push combined News Corp. U.S. user traffic to 70 million unique monthly users and 12 billion page impressions per month (including Intermix, recently acquired Scout media, and IGN), which would put it well within the top 10 most trafficked sites on the Internet. Aggregation of established websites provide a defensive strategy against the continued migration of advertising spending from traditional media (television, newspaper) to the Internet. However, over the longer term, the establishment of an integrated web destination that targets a younger demographic can also function as an offensive strategy as competition for Internet advertising revenue continues to intensify. We believe that ultimately the company seeks to create a virtual advertising network that will provide value beyond the existing cash flows generated by the individual sites.”