MySpace: WhoseSpace?

News Corp.'s acquisition of the social networking site has unsettled some members. But the founders, and a Fox exec, say don't worry

The sale of MySpace to media giant News Corp. (NWS ) has created a delicate situation for the founders of the wildly popular Web site. MySpace is the leader of a new form of Net-based social interaction in which users form networks of friends by linking to homepages loaded with photos, messages, and streaming music and video.

Less than two years old, the site already gets more page views than Google (GOOG ). And with 22 million users, it's well on its way toward achieving its ultimate goal: creating a major online destination on par with AOL (TWX ), Yahoo! (YHOO ), or MSN (MSFT ) (see BW, 6/13/05, "Hey, Come to This Site Often?").


  But word that News Corp. (NWS ) would acquire MySpace parent Intermix (MIX ) for $580 million has unsettled some members of the service. The July 18 announcement sparked 800 comments to a story at BusinessWeek Online (see BW Online, 7/19/05, "News Corp.'s Place in MySpace").

MySpace, which is particularly popular among 16- to 34-year-old fans of alternative music, has an iconoclastic edge. The prospect of being owned by one of the world's largest media conglomerates, especially one known for conservative media outlets like the Fox News Channel and The Weekly Standard, raised more than a few hackles.

"News Corp. is an awful company," wrote one user who identified himself as Rick. "Selling to Fox? What a terrible idea," wrote another user, "erinoly." And "blah blah" wrote that "These FOX peeps are control freaks that don't see past the dollar sign."


  MySpace President and co-founder Tom Anderson, 29, tried to calm their fears. He sent a note to members shortly after the deal was announced saying that the site will not change. He also addressed rampant rumors that were sparked by the sale. The full text of the brief note said:

"Many of you have asked about NewsCorp buying MySpace.... Everyone seems scared that MySpace is going to change. I'm not leaving, and I'm still making the decisions about the site, and I'm not going to let things suck.

"The rumors people are reposting in bulletins are not true: 1) We are not going to become a pay site. 2) We are not increasing advertising. 3) We are not allowing anyone to monitor the site. 4) We are not deleting any content or censoring people in any new way. (we've always deleted nude pics and hate speech) 5) We are not exploiting anyone's data or violating anyone's privacy.

"MySpace has been my life for almost two years now. I know it's as important to others as it is to me. I won't let it get jacked up."


  The memo seemed to calm at least a few users. "I have a lot of faith in Tom and he will make all the right decisions," a user named "Chelle" wrote. And "CABRON" warned: "Tom is one bad dude and if Fox even thinks of trying to make us pay for our beloved little Web site -- we'll pull some kung fu on them and they will cry."

In an interview with BusinessWeek, MySpace CEO and co-founder Chris DeWolfe, 39, said he didn't believe News Corp. would risk harming an asset it was spending money to acquire. He said the benefit for MySpace is that News Corp. will be able to fund the expansion and development of the site. The focus will be on adding international markets and communications features like instant messaging.

BW Online reporter Steve Rosenbush recently discussed the future of the MySpace with News Corp.'s Ross Levinsohn, president of its newly created Fox Interactive Media unit. Levinsohn discussed the rationale behind the deal and said the company has no plans to interfere with the operation of the site. Edited excerpts of the discussion follow:

Q: How did this deal come together? Why are you spending $580 million for MySpace?


I've been in the Internet space for 12 years, and I've never seen a company grow and catch on at the rate that MySpace has. We [at Fox] are very good about displaying news, but not at capturing or understanding in any detail what's going on in social networking. How do you talk to consumers, and let them create content? That's not what we do. But MySpace has perfected it.

Q: How do you take advantage of this deal without destroying what MySpace has built?


We're smart enough to know the areas where we're dumb and find other people people who are smart to help us. The last thing we're going to do is screw up what Tom [Anderson] and Chris DeWolfe have built.

They're very smart, and we're going to continue to let them do what they do. They have tapped into the mind-set, the tribal nature of the Web. We know sports and news, but they know social networking, and we're getting the best guys out there.

Q: But you must have some ideas about how Fox and MySpace can work together. What will they be?


We will probably come up with hundreds of ideas. If it makes sense, we'll do it. But it won't be us at Fox saying, "Here's a premiere of a new TV show. Put it up on MySpace." Part of the beauty of this deal is that users can tell us what's cool. Or we can use it to help figure out what the Next Big Thing is, and we can develop some traditional media properties around that.

Q: Will your rivals in the media market be able to market and advertise on MySpace, as they do now?


Yes, MySpace can still sell to other media companies, absolutely. The minute you try to just sell Fox stuff, you will ruin the brand.

Q: How do you envision this site evolving over the next few years?


Chris and Tom and their team really believe this can be a lifestyle portal, and we agree.

Q: News Corp. has a reputation as a politically conservative company. Will MySpace be at odds with the company's culture? Is this sort of an odd pairing? Will you impose more controls?


We certainly don't want to do something that's illegal or in bad taste. But having said that, MySpace's success is based on free speech, and that's a great thing. We don't know how much we can control it. That's the beauty of MySpace.

And I'm not sure it's true that News Corp. is a conservative company. Fox is the edgiest broadcast network out there. If you look back over the last 10 years, no one has pushed the envelope more than Fox. We pushed it with reality TV. We have done shows like The Simpsons and The Family Guy, 24, Nip Tuck, Over There, and Rescue Me. Those are really edgy shows. When it comes to news operations, we own a lot. Some are liberal and some are conservative.

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