Murdoch’s moves tough to read

News Corp. maneuvers are puzzling

News Corp. spent the last several years as the digital darlings of Wall Street, snapping up MySpace, pumping up the Beverly Hills-based Fox Interactive and boldly launching a so-called “YouTube killer” when other congloms shied away.

But with several recent moves it appears to have made an about-face, raising the question: What, exactly, is News Corp’s digital strategy?

News Corp.’s most prominent acquisition play at the moment is a decidedly Old Media push — a $5 billion bid to buy Dow Jones, parent company of the Wall Street Journal.

Late on Wednesday, News got a major boost in that bid when the Bancroft family and Dow Jones said that all negotiations for a sale to News Corp. were being turned over to the Dow Jones board–suggesting that the Bancrofts’ had been placated on their primary concern of editorial integrity.

That puts News Corp. one step closer to spending $5 billion on an Old Media empire. (While News Corp execs have positioned financial news as a 21st-century enterprise, Dow Jones Newswires are in fact an also-ran in that category; the jewel in the crown is the Journal.)

Also on Wednesday, word leaked out (in News Corp.’s own The Times of London) that the conglom was interested in giving up its own jewel for a less obvious New Media property: it wanted to swap MySpace with Yahoo for a 25% stake in the embattled Internet giant.

And Yahoo is about the furthest things from a digital darling at the moment, having undergone a regime change earlier this week with Terry Semel stepping down as CEO.

Media observers on Wednesday noted that the sheer dollar differential of a Yahoo-MySpace deal could make the swap another shrewd Rupe move.

The company paid about $580 million for MySpace in August 2005; twenty-two months later it would receive a stake valued at more than $10 billion. (Yahoo is currently valued at $37 billion, though that could decline if ad forecasts don’t rise.)

It’s a massive return by any measurement. “It’s amazing that Murdoch can use such a small asset like MySpace to take out such a big piece of a company like Yahoo,” said one exec at a rival conglom.

But why Rupert Murdoch would want Yahoo–and how he would use it if he had it–remains in many ways a bigger question than the dollar coup.

MySpace has been a successful business, raking in half-million dollar ad packages from studios and other big-ticket advertisers and continuing to grow users among the lucrative teen demo.

Even so, the fit has been an odd one; while the company has used it to promote properties like “Borat,” its utility as an entertainment platform has been limited.

Yahoo, for all its size, has struggled as an ad player over the last year. And its original-entertainment offerings have been disappointing. That could make it an even stranger fit.

Wall Street also seems perplexed by the move -investors basically sat pat, as the stock stayed flat on very light trading Wednesday.

At a moment when investors criticize Yahoo for keeping Semel, former Warner Bros. co-topper who supposedly “didn’t get” Silicon Valley, one wonders how Murdoch might be received by both employees and investors.

Still, several analysts noted that if Murdoch wanted a site with reach that could compete with Google-YouTube, Yahoo would fit the bill, automatically giving it a large built-in audience.

That, in turn, would aid its nascent viral-video venture with NBC U and could finally draw other reluctant congloms, like CBS and Viacom, to join in.

Several of those interviewed on Wednesday dismissed the Yahoo deal as a political move–either saber-rattling to show Murdoch is an acquisition mode or, perhaps, even a way to save face if the Dow Jones bid doesn’t go through.

That bid suddenly got more competition when GE and Pearson jumped into the Dow Jones fray earlier this week.

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