Forbes has taken a microscope to the Murdoch empire.
I have to say that describing the MySpace acquisition as "an impulse buy" is just bobbins. Murdoch, I'm quite sure, is flanked by the very best advisors money can buy and knew exactly which way the wind was blowing. The leopard print stilettos I bought as a Christmas present for myself were an "impulse buy". Not quite the same thing.
News Corp was totally validated in its MySpace purchase, as we know, but the ign deal is less well known. Murdoch paid $650m for the group of lad-mag sites in September 2005, but user numbers have grown by a disappointing 21% in 14 months.
"In late 2004 Murdoch and Chernin, watching the resurrection of Yahoo!, the rise of Google and the shift of ad dollars to the web, jumped back in. The best way to access the power of the internet, they decided, was by inserting yourself where users already congregate."
Murdoch reportedly earmarked $2.3bn for web properties, but has "only" spent $1.3bn of that. When former Fox Interactive head Ross Levinsohn was sent out to find three targets he came back with MySpace, ign and one more that remains unidentified. Could that have been YouTube? News Corp balked at the price paid by Google and are reported to have refused a lower price tag.
"Murdoch and Chernin would very much like to own the next YouTube, but they are unlikely to be able to buy it. In this phase of Bubble 2.0 there are no under-the-radar websites and, as Murdoch ruefully acknowledges, Google, armed with its $500 shares and a $10.4bn cash hoard, can afford to buy anything it wants."
Consequently News Corp wants to develop the next YouTube in-house. Can News Corp really do that, and is it too late? The dilemma for Murdoch should be whether he does a ad revenue share deal with Google, or goes ahead with the rival consortium proposal. (See Big media's YouTube rival in this digest from December.)
Fingers in pies
Other fingers in pies indicate a possible movie downloads business - part of the ign acquisition included Direct2Drive, technology that compresses files of games and video. There was also the $188m acquisition of mobile content firm Jamba, and the mobile MySpace launched with Cingular that registered 70,000 sign-ups in its first two weeks. A similar deal is reportedly being brewed with Vodafone for Europe.
Forbes also points out that web activities aren't listed independently on the company's financial returns, but are lumped in the "other" category with billboard ads and a rugby league. There's probably good reason for that. One analyst put News Corp's web revenues at $185m for the 2006 financial year, and even the 2007 estimate of $500m revenue by chief operating officer Peter Chernin looks insignificant against the company's total $25.6bn revenue.
The buzz around MySpace may have contributed to the 41% run of News Corp shares in the past year but a "hodgepodge of old-line media properties" are still at the core of the company.
Traditional advertising in the US still far outweighs online spend - $283bn to $16.4bn - though those quick stats don't reflect the massive increase in online spend. Forty percent of that online spend is in search, and Google takes a large chunk of that. Their Q4 results are announced tonight, incidentally, so expect lots of crowing and then lots of greenness from old media types.
More news...
What's so special about Second Life?
eBay has banned the sale of virtual goods from online games including World of Warcraft, reported Slashdot on Friday, but a follow up by CNET revealed that Second Life has escaped the ban because it's not a game.
eBay say this is down to the risk of fraud, but by making a distinction between games and worlds, the auction giant will force users to go through third party sites like Internet Gaming Entertainment and Station Exchange.
