News Corp explores swap of MySpace site for Yahoo! stake
News Corporation has discussed swapping MySpace, its internet social networking unit, with Yahoo! in return for a 25 per cent stake in the enlarged group. — The discussions remain tentative and could collapse after the departure …
Context & Ripple Effects
The Times of London reports News Corp has discussed handing MySpace to Yahoo! in exchange for roughly a quarter of the enlarged group — talks described as tentative and liable to collapse. The pickup is unusually wide: the Washington Post, New York Times, ZDNet and TechCrunch all chased it within days, with TechCrunch simultaneously running rumor-control pieces defending MySpace against decline talk and asking outright whether the site is worth $12 billion.
Yahoo! comes to this conversation weakened: its board slate survived the June 12 annual meeting with only a 66% majority after calls to punish directors over executive pay, even as the company closed Yahoo! Photos to concentrate on Flickr and paid about $100 million for Rivals.com. A rumored 25% News Corp stake would land squarely in that shareholder-activist moment.
First-order effects
- If the swap proceeded, News Corp would exchange operating ownership of MySpace for the position of major Yahoo! shareholder, converting its 2005 social-networking bet into equity influence without running the site.
- Yahoo!'s board — freshly bruised by the low re-election margin over pay packages — would be asked to justify diluting shareholders by a quarter to absorb a rival social network.
Second-order effects
- Facebook, which alongside MySpace spent mid-June reassuring subscribers that only designated friends can read private postings amid an emotional-distress suit testing both platforms' privacy limits, would face a MySpace backed by Yahoo!'s mail, photos and search reach rather than a standalone competitor.
- Yahoo!'s portfolio logic points one way already — killing Yahoo! Photos for Flickr — so integrating MySpace would force decisions about which overlapping community and photo products survive inside the combined group.
Third-order effects
- The structure on the table — a media conglomerate swapping an audience asset for portal equity — treats social networks as tradeable currency in consolidation rather than businesses to be operated, a pattern rivals would come under pressure to copy.
- Each mega-merger of subscriber bases raises the stakes of the privacy litigation now testing MySpace and Facebook, pushing regulator attention toward how large platforms police access to member content.
The trend: Traditional media owners are moving from buying social networks outright to trading them as strategic stakes, as portals and publishers scramble to combine audiences against newer entrants like Facebook.