News Corp. attracts buyer--and pop star

Can Justin Timberlake bring sexy back to MySpace?

The long-anticipated news that News Corp. would unload the struggling social network took an unexpected turn late Wednesday when buyer Specific Media announced that the actor-singer would take an ownership stake in MySpace, where he would play “a major role in developing the creative direction and strategy.”

The $35-million sale marks an ignominious end to the struggling social network’s stint in the News Corp. empire, which began in 2005 with a $580 million acquisition.

News Corp., which was hoping to fetch as much as $100 million for the sale, will hold onto a small stake of MySpace. The deal will likely also prompt massive layoffs at MySpace ahead of the sale.

But now a whole new chapter opens up thanks to a little-known online ad network and a celebrity who most recently played Sean Parker in the movie about MySpacerival Facebook, “The Social Network.” Specific emerged from a group of bidders that included Golden Gate Capital, Austin Ventures and Activision Blizzard CEO Bobby Kotick. The Irvine, Calif.-based company is expected to blend into its massive ad network the approximately 35 million unique visitors MySpace still draws per month.

In a statement, Timberlake seemed to suggest he would continue to build on a last-ditch strategy MySpace began employing in late 2010 to reposition itself as a “social entertainment” hub that connected its user base to music, TV and movies.

“There’s a need for a place where fans can go to interact with their favorite entertainers, listen to music, watch videos, share and discover cool stuff and just connect,” said Timberlake. “MySpace has the potential to be that place.”

In a memo to the staff, CEO Mike Jones announced he would leave the company. “While I regret we won’t be working together at MySpace any longer, I am very proud of the work we have done here and believe we have performed with excellence — even under extremely difficult circumstances.”

The sale of MySpace at a fraction of its acquisition price marks a humbling exit strategy for Rupert Murdoch, who has also bought and sold other new-media brands of note including Photobucket, Beliefnet and Fox Mobile Group. News Corp. aggressively moved to snatch MySpace away from Viacom, a maneuver that spurred Viacom chairman Sumner Redstone to oust Tom Freston as CEO of the conglom. (Of course, Freston’s forebearance now seems downright visionary in retrospect.)

As indicated by the MySpace saga, after years of hype surrounding strategic investments, content companies are now playing it cool, said Laura Martin, an analyst with Needham & Co.

“This divestiture is consistent with the caution that large-cap old-line media companies have brought to the digital-media space,” she said, noting that Disney has been an outlier to that trend given several expensive acquisitions made on the social-gaming front in recent years.

While News Corp. prexy Chase Carey likely won’t be bragging about the sale price on News Corp.’s next earnings report, the conglom should benefit from cutting its losses and avoiding the distraction MySpace had become, especially in 2010 as it became clear that the site’s days were numbered.

Debra Aho Williamson, an analyst who tracks social networks for eMarketer, believes MySpace was a bad fit for News Corp. from the start.

“News Corp. didn’t really know how to manage MySpace,” said Williamson. “There was always that tension between corporate owners who wanted to make a buck and creative visionaries make it as a place for self-expression.”

But MySpace was said to have suffered from intrinsic problems as well, as founders Chris DeWolfe and Tom Anderson were blamed for failing to drive innovation crucial to keep the site relevant. They were pushed out by 2009, when News Corp. began noticing MySpace had lost momentum after years of torrid traffic and revenue growth.

Williamson noted the irony of Specific rescuing MySpace, considering it was the overabundance of ad networks on MySpace that may have ruined it in the first place. “Think of all those pages that were cluttered with flashing banner ads and you see how terrible ad networks were for MySpace,” she said.

The declining user experience became all the more problematic amid the ascent of Facebook, which provided a cleaner, more accessible alternative. “Once a large portion of the online audience started gravitating to Facebook, it became harder for MySpace to gain any traction,” said Williamson.

While best known as a thesp and singer, Timberlake has long been an entrepreneur as well, with investments ranging from fashion label William Rast to tequila brand 901. But it’s unclear whether Timberlake will exercise a vision behind the scenes or lend his image to MySpace as a means of revitalizing it.

Shahid Khan, managing partner at media advisory firm MAG, praised Specific for bringing in Timberlake, who he believes could help bring MySpace back in touch with the musician fan base that’s never abandoned the site.

“If you take what MySpace has always been good at historically and continue with what Timberlake means to that world, you can make a decent go of it,” he said.

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