Myspace Opens Books to Prospective Buyers
News Corp.'s efforts to sell Myspace are advancing, as bankers Allen & Co. this week begin to schedule meetings with suitors, people familiar with the matter said. — The meetings, which will give interested buyers a detailed look …
Context & Ripple Effects
News Corp has spent years circling an exit from Myspace: back in June 2007 it explored swapping the site for a Yahoo! stake, and by mid-2008 analysts were already noting that Myspace's growth curve had flattened even as it remained a real business.
The endgame has accelerated sharply since then — Myspace confirmed plans in January 2011 to lay off 550 to 600 of its just-over-1,000 employees, while repositioning around music and entertainment via its Facebook Mashup integration and iPad apps like Music Romeo. Now bankers Allen & Co. are scheduling management meetings with suitors, giving buyers their first detailed look at the books.
First-order effects
- Serious bidders get formal diligence access through Allen & Co., moving News Corp's exit from cost-cutting mode (the January layoffs) into an active auction process.
- Any buyer inherits both the retrenched staff and the strategic pivot already underway: entertainment-focused products built on top of Facebook logins rather than Myspace's own identity graph.
Second-order effects
- Suitors are most plausibly media and entertainment companies rather than social platforms, since what remains valuable is the music/video catalog relationships and audience, not the network itself.
- The sale process pressures News Corp to accept a price far below the ~$580 million it paid in 2005, setting a visible markdown benchmark for other first-generation social properties.
Third-order effects
- If the pattern holds, general-purpose social networks that lose their user base get repriced as niche vertical assets — music and entertainment brands worth a fraction of their acquisition price — reshaping how media conglomerates value social acquisitions.
- A distressed-sale outcome also reinforces the platform-dependence problem: a Myspace rebuilt on Facebook profiles shows that even large incumbents' successors can end up building on a rival's infrastructure.
The trend: First-generation social networks are being unwound or sold off at steep discounts as they cede general-purpose social territory to Facebook and retreat into niche entertainment niches.