News Corp Dragged Down by MySpace

Includes: GOOG, NWS
by: The Deal Economy

For Rupert Murdoch, new media has not been so kind to News Corp. (NYSE:NWS). A thinly sourced Financial Times story highlights how MySpace continues to drag down the media conglomerate -- which happens to also own the FT's chief rival, The Wall Street Journal.

Murdoch is also in the news Monday for telling reporters that when News Corp. launches its paid strategy, it will probably remove its sites from Google Inc.'s (NASDAQ:GOOG) search engine index.

Not only did Murdoch's empire pay $580 million for MySpace back in July of 2005, just as Facebook Inc. supplanted it as the preferred social media site, but News Corp. had committed $350 million for 12 years for office space for MySpace that may never be used following a layoff of 40% of staff.

Since August 2008, News Corp has been paying more than $1 million a month for 420,000 square feet near Los Angeles International Airport that remain unused since new management cut staff. And if paying $1 million a month for nothing is bad enough, the rent will double in 2010. Efforts to sublease the space amid the down economy reportedly have been fruitless.

The FT continues to lay on the criticism, noting that MySpace missed its traffic targets, meaning News Corp. will earn $100 million less than it expected from a search deal with Google Inc. (NASDAQ:GOOG). - Matthew Wurtzel