News Corp. has agreed to sell MySpace to Specific Media for a fraction of what it paid six years ago, ending its efforts to turn around the money-losing social-networking business.
News Corp. will receive $35 million, including a 5% stake in Specific Media, according to a person with knowledge of the situation who wasn't authorized to speak publicly. Specific Media announced the sale in a statement today, without providing the terms.
The accord rids News Corp. Chairman-CEO Rupert Murdoch of a website that lost its lead in social networking to Facebook after being acquired in 2005 in a $580 million deal. The company had sought about $100 million for MySpace after chief operating officer Chase Carey said in February he wanted a deal completed by the June 30 end of the parent company's fiscal year.
"It gets MySpace off their books finally, which has a certain value," said Michael Gartenberg, an analyst at Gartner, the research and advisory firm. "This shows how fast things change on the Web and how quickly $580 million in value can vanish."
MySpace CEO Mike Jones -- who led a redesign in October aimed at building online communities around films, TV shows and music -- will depart after a two-month transition that includes "significant" job cuts, he told employees today in a memo.
News Corp.'s stake in Specific Media will be mutually beneficial, Specific Media CEO Tim Vanderhook said in a statement. "There are many synergies between our companies as we are both focused on enhancing digital-media experiences by fueling connections with relevance and interest," he said.
For Specific Media, MySpace's 34.9 million monthly visitors provide an audience for its network of online ads. The company was formed in 1999, and in 2002 created an advertising network that places marketers' messages on websites.
Mr. Vanderhook takes credit for creating the so-called pop-under advertising unit after the dot-com bust a decade ago. The company has run campaigns for New England Jeep dealers, Colorado's lottery and Air New Zealand, the website says.
Specific Media raised $100 million from San Francisco-based private-equity firm Francisco Partners in 2007, according to the website. Its acquisitions include Broadband Enterprises, an online video company known as BBE.
Under the new owners, MySpace isn't likely to rise up and compete with Facebook as a social network, Mr. Gartenberg said. But Specific Media can still make the website profitable, he said. "There are a lot of opportunities for MySpace to carve out a niche in social music exploration," he said. "The brand is probably worth what they reportedly paid, even though it's a fire-sale price."
Jack Kennedy, exec VP of operations for News Corp.'s digital group, oversaw the sale process, while Allen & Co., a New York-based investment bank, marketed the website to potential buyers.
Facebook had 157.2 million U.S. users in May, according to ComScore. It had a market value of $71 billion yesterday, according to SharesPost, an exchange for stock in privately held companies.
Results for MySpace aren't broken out in News Corp.'s financial statements. The division that includes MySpace lost $575 million in the fiscal year ended June 30, 2010, according to company reports. During that period, MySpace lost less than $100 million, the website said in an email in October.
-- Bloomberg News --