Murdoch's Web Gambit
It was 3 a.m. on the West Coast. While lawyers and bankers were haggling over the details in New York, Ross Levinsohn was on an Internet-service phone in the den of his West Los Angeles home offering last-minute directions on a $650 million deal. The pressure was on: News Corp. (NWS ) Chairman Rupert Murdoch was hustling the prize, Internet gaming and entertainment site IGN Entertainment, away from fellow mogul Sumner M. Redstone, Viacom Inc.'s (VIA ) chairman and CEO. Levinsohn, only seven weeks earlier elevated to head of the Fox Interactive Media unit, had been talking to IGN. Suddenly, he learned that Redstone was nearing completion of due diligence to buy the site. Levinsohn and team turned up the heat and won the contest over the next 48 hours. "We pride ourselves on moving quickly as an organization," said News Corp. President Peter Chernin after IGN was safely in his camp.
Murdoch's Internet strategy has been simple enough: buy, buy, and buy some more. Since July he has spent $1.3 billion to purchase IGN, along with Intermix Media Inc. (MIX ), which controls social networking site MySpace.com, and sports online network Scout.com. But if Murdoch is doling out the cash, it's Levinsohn, a onetime sports publicist, who has been drawing up the cyberspace playlist. Until recently, Levinsohn had been Fox's in-house jock, overhauling its Fox Sports online operation to make it a competitor of ESPN.com. Now, as Murdoch redesigns News Corp.'s Internet future, Levinsohn, 42, will be responsible for transforming the company's far-flung TV, Hollywood, and newspaper properties into cybermagnets. "He's the guy we're relying on to make it work,"says Chernin.
Murdoch's ambitious online gambit has been brewing for months, say News Corp. insiders. The 74-year-old mogul was spurred into action, they say, by a Carnegie Corp. survey that showed 44% of 18- to 34-year-olds get their news from the Web, vs. 19% from newspapers. Murdoch's friends were chiming in, too. Microsoft Corp. (MSFT ) Chairman William H. Gates III was telling him -- and the world -- that Internet advertising would climb to $30 billion in three years, roughly twice what it is today. This set off alarm bells for Murdoch, whose businesses get a healthy chunk of their $23.9 billion a year in total revenues from advertising. It all pointed to an overhaul of News Corp.'s stable of Internet sites, including those tied to its Fox Sports and Fox News cable channels that appealed to an over-30 crowd but not to the younger folks flocking to the Net and wireless digital. "We needed to get younger -- and quickly," says Chernin.
For Chernin, Levinsohn was the perfect guy to jump-start the effort. After working in the sports world, including a brief tour with the ProServ Inc. sports agency, Levinsohn was the closest News Corp. had to an Internet heavyweight. He ran the news operation for CBS Sportsline.com before heading off to AltaVista Co., a portal that's now owned by Yahoo! Inc. (YHOO ).
At News Corp., Levinsohn shone. Assigned to struggling Fox Sports online in 2001, he remade the money-losing operation by closing regional sites to go national. He signed on with RealNetworks Inc. (RNWK ) and MSN to provide them sports data and within three years had boosted traffic from 800,000 to 10 million unique visitors a month. In one of Fox's most innovative deals, it merged its fantasy sports operation -- a passion for Levinsohn -- with that of Paul Allen's The Sporting News, gaining 300,000 subscribers without paying for them. Sporting News gave Fox Sports articles and stats, while Fox promoted the site with a half-hour show on the Fox Sports TV channel. Levinsohn "is a smart, resourceful guy who does a lot with what he has," says Houlihan Lokey Howard & Zukin investment banker Jon Richmond, who first hired Levinsohn in 1999 when he ran Murdoch's first Internet effort, News Digital Media, which closed in 2001.
This time around, News Corp. is counting on a whole lot more folks with broadband -- up to 53% of the U.S. by 2009, as projected by PricewaterhouseCoopers. To draft a battle plan for capturing that growing audience, Levinsohn went underground. Closeted with seven other Fox Internet executives in March, he settled into the W Hotel near University of California at Los Angeles for a week, coming up with a list of targets in a conference room full of computers. Some, such as Scout.com, were on his list at Fox Sports. Others, like blinkx, a search engine that collects video and audio clips, were ideal for News Corp.'s huge collection of TV shows, trailers, and news segments. Not all panned out: The blinkx talks have broken down, and News Corp. walked away from a bid for Internet phone provider Skype Technologies. Levinsohn joined Murdoch and his son, James, in those talks. But Murdoch, who has plans to spend $2 billion, if not more, says two smaller deals may be coming within the next few weeks.
Melding News Corp.'s new Internet acquisitions with its stable of traditional media properties won't be a snap. For starters, Brad Greenspan, a 10% owner in MySpace parent Intermix Media, says he is trying to line up partners for a rival bid. The board has shot down Greenspan's overture, but shareholders will vote on it on Sept. 30. News Corp. executives aren't commenting on a possible new bid.
But Murdoch isn't slowing down his cyber invasion. After agreeing to buy IGN, the media tycoon gathered four dozen senior executives, including folks from MySpace and IGN, for a retreat at the Carmel Valley Ranch, near Murdoch's Northern California spread. There Levinsohn outlined the overall strategy: to build on the 70 million unique monthly users who click onto News Corp.'s old and newly acquired sites. Many are under 30, so Fox has to make sure users aren't alienated by a Big Media footprint on the hip new acquisitions. "The trick is to give these folks content without them thinking it comes from Big Fox," says Levinsohn. "It has to be organic," adds MySpace CEO Christopher T. DeWolfe. "Our people can tell the difference."
Murdoch may be in a hurry to conquer the Net, but Wall Street is apparently perplexed by his new dash. "If there's a strategy there, I don't see it yet," says Fulcrum Global Partners LLC analyst Richard Greenfield. Both Chernin and Levinsohn admit they're still feeling their way. Yet News Corp. has won a massive number of new eyeballs in a short period, thanks to a onetime jock who says he used to have a five handicap in golf. That was before the late-night calls, nonstop travel to check out News Corp.'s latest acquisitions, and the sprint of devising a new and improved Internet plan -- fast.
By Ronald Grover