Netcos begin bidding for MySpace contract
Rupert Murdoch’s Internet empire won’t include a proprietary search engine.
At an investor conference Tuesday, News Corp. prexy Peter Chernin said the conglom is soliciting bids from Google, Microsoft and Yahoo to provide search services, along with potentially lucrative search advertising, for social networking powerhouse MySpace.
“It’s probably too late to get into the search business,” Chernin acknowledged Tuesday at the Deutsche Bank media conference in Santa Monica.
As the conglom spent billions in the past year to acquire several huge Web properties, including MySpace, IGN Entertainment and Scout Media, many speculated Murdoch would purchase a search engine as well.
News Corp. is known to have looked at several small players, including video search company Blinkx. However, Chernin’s comments confirm that search is one new-media market in which News Corp. won’t compete.
Decision is similar to that of Time Warner, which last year let Google and Microsoft get into a fierce battle to provide search for America Online that resulted in Google paying $1 billion for that exclusive contract and a 5% stake in AOL.
Bidding for the MySpace contract undoubtedly will be equally intense, since it would let any one of the three biggest Netcos supply ads targeting the 48 million individuals, mostly young people, who visit MySpace each month. MySpace is the world’s eighth most popular Web site.
Although Chernin did not discuss further details, it’s possible a partnership with one of the key Netcos could go beyond search to include content-sharing or other joint initiatives.
Unleashing ad revenue from juggernaut MySpace.com is a key priority, Chernin said.
To that end, he disclosed that Fox Interactive Media, which oversees all of News Corp.’s Web properties, has hired an advertising exec, later confirmed to be Michael Barrett, formerly exec VP for worldwide sales and marketing partnerships at AOL.
As chief revenue officer for FIM, Barrett will oversee sales, business development and strategic partnerships, a category that would include the pending search deal.
In addition, FIM promoted John Trimble, who formerly oversaw ad sales for FoxSports.com, to senior VP advertising sales, reporting to Barrett.
Chernin sees MySpace getting $600 million-$800 million from display ads (separate from any search revenue) in the next three to four years.
While Web giant MySpace was a main focus of Chernin’s talk, he touched on a number of challenges facing News Corp. in the digital age.
Exec told investors that big media’s biggest management challenge in the digital age is “psychological” — to try not to protect existing businesses against change: “You have to avoid that at all costs. To maximize them, but not protect them.”
TiVo devices are “a challenge to our broadcast business, but a huge opportunity for our satellite business. It took a second, (but) as for our broadcast biz, DVRs are coming anyway. They have to learn to live with it. Not only that, they better learn to thrive under it.”
Chernin said News Corp. is plowing cash from mature businesses into “growth drivers” such as cable, satellite, new media, Asia and Eastern Europe.
On the softening DVD market, he said, “Marginal titles and marginal catalog aren’t performing well, and I guess that’s the way life is going to be.”
But he said he’s pleased with Fox’s video lineup and its distribution prowess. MGM recently pulled the plug on its distribution deal with part-owner Sony to pact with Fox.
New high-definition DVDs will help, although “I think it would be nice if we were smart enough to get one format, which, clearly, we’re not,” he added.
He expects consumers to start buying new DVD releases on high-def and replace three to five of their favorite library movies a year.