News Corp. to Acquire Owner of MySpace.com
By RICHARD SIKLOS
The News Corporation, making one of its largest bets on the Internet, announced today that it is paying $580 million in cash to acquire Intermix Media Inc., a Los Angeles-based company whose chief asset is MySpace.com, a Web site that is enjoying surging popularity with young audiences.
The acquisition's price is sure to ignite debate about valuations and durability of new media companies because MySpace, the main attraction among Intermix's 30-odd Web sites, is only two years old.
MySpace.com is a youth-oriented music and "social networking" site that has grown to more than 16 million monthly users. Its members spend hours on the site, exploring areas devoted to personal classifieds, music, blogs, video games and chat rooms.
Several prominent music groups, including the Black Eyed Peas, R.E.M. and Nine Inch Nails, have introduced their latest releases by streaming them on MySpace. Also, major advertisers including Procter & Gamble and Sony Pictures have advertised on the site, and NBC ran a streaming preview of the comedy "The Office" earlier this year. According to News Corporation, MySpace attracts the fifth-most page views of any Web site.
Intermix's other web businesses include sites with such names as grab.com and flowgo.com. Their addition to News Corporation's existing Web site operations will nearly double the company's Web traffic in the United States to 45 million unique monthly users.
The deal comes immediately after the formation Friday of a new unit within News Corporation, Fox Interactive Media, which will house Intermix as well as sites like foxsports.com, foxnews.com, and fox.com.
"We see a great opportunity to combine the popularity of Intermix's sites, particularly MySpace, with our existing online assets to provide a richer experience for today's internet users," said News Corp.'s chairman and chief executive officer, Rupert Murdoch.
Intermix gained attention earlier this year when the New York attorney general's office sued it, accusing it of illegally planting "spyware" programs on the computers of people who visited its Web sites. The company has since announced a preliminary out-of-court settlement of $7.5 million over the matter. News Corporation will pay $12 a share for the outstanding shares of Intermix, while Intermix simultaneously said it will buy out minority partners who currently own 47 percent of MySpace.
MySpace was launched in September 2003 by entrepreneurs Chris DeWolfe, who is the company's chief executive, and Tom Anderson, its president. They had sold a previous company to Intermix, which provided funding to the venture.
News Corporation owns interests in media assets around the world, including the Fox TV and 20th Century Fox television and film studio operations in the United States. as well as The New York Post and London Times newspapers, HarperCollins book publishers and the satellite broadcaster DirecTV. In buying MySpace, the company is following Mr. Murdoch's edict for the far-flung company to follow the increasing numbers of audiences and advertisers online.
Like most traditional media players, News Corporation has had a mixed experience in trying to extend its businesses online as companies like Google and Yahoo have attracted ever-higher stock market valuations.
The conglomerate is clearly making the claim that MySpace will have staying power in the fast-evolving online world. Part of MySpace's success has come at the expense of similarly conceived Web sites built around online communities, like Friendster, that have seen the number of users skyrocket but then decline.
A News Corp. official said MySpace generates "healthy" annual profits of "a few million dollars." Overall, Intermix reported earnings of $4.5 million on revenues of $78.9 million in the quarter ended March 31, compared to a loss of $12.4 million on revenues of $57.3 million in the year earlier period. Its shares closed at $11.74 today, up $1.02 on the news. News Corp. shares were down 2cents to $17.45.
The agreement is scheduled to close in the fourth quarter, and both Mr. DeWolfe and Intermix Media's chief executive, Richard Rosenblatt, are expected to stay in their current positions.
