Tuesday, January 11, 2011 at 10:10 PM 

500 fired as MySpace restructures

MySpace is cutting 47 percent of its staff amid reports that owner News Corp. is preparing the social-networking website for a ...

Andy Fixmer and Sarah Rabil

Bloomberg News

 

MySpace is cutting 47 percent of its staff amid reports that owner News Corp. is preparing the social-networking website for a possible sale.

MySpace is firing about 500 employees in a broad restructuring across all of its operations, according to an e-mailed statement from the Beverly Hills, Calif.-based website Tuesday. MySpace will enter into local partnerships in the U.K., Germany and Australia to manage advertising and content.

Chief Executive Officer Mike Jones, charged with paring losses and rejuvenating business at MySpace, has retooled the site to focus on helping users discover music and videos, rather than connect with each other. Last month the site renewed an advertising pact with Google, adding display advertising, after revenue fell short of News Corp. projections.

"Today's tough but necessary changes were taken in order to provide the company with a clear path for sustained growth and profitability," Jones said in the statement. "These changes were purely driven by issues related to our legacy business, and in no way reflect the performance of the new product."

After the restructuring, MySpace will be put up for sale, All Things D, a website owned by New York-based News Corp., reported Monday. The business will be offered to private-equity firms and possibly to Yahoo, the website said.

Rosabel Tao, a spokeswoman for MySpace, said in an e-mail that Jones declined to comment beyond the release. Dana Lengkeek, a spokeswoman for Yahoo, said the company doesn't comment on rumor or speculation.

MySpace has seen an uptick in new and returning users since the redesign, Jones said in the statement. More than 3.3 million new profiles have been created, and mobile users rose 4 percent between November and December to more than 22 million, he said.

News Corp. will most likely shutter MySpace by June "unless we see a remarkable turnaround in the next few months," Alan Gould, an analyst with Evercore Partners, said in a research note to clients Tuesday before the restructuring was announced.

Fox Interactive Media, which includes MySpace, may lose $225 million this fiscal year, up from an estimated $180 million last year, Gould said. He reduced his estimate for News Corp.'s fiscal 2011 operating income by 5 percent because of MySpace's losses and weaker film results.

Chase Carey, News Corp.'s chief operating officer, said on a November conference call that MySpace's losses "are not acceptable or sustainable." He set a goal for the site to be cash positive in June, the end of News Corp.'s fiscal year.

MySpace lost less than $100 million in the fiscal year ended in June, a spokesperson for the website told Bloomberg in October.

In a previous round of cuts in June 2009, MySpace reduced staffing by about 30 percent after advertising sales fell and social-networking rival Facebook surpassed the site in U.S. users. 

MySpace unveiled a new look in October aimed at winning back younger users uninterested in staying on the same social network as their parents.

There were similar attempts to revamp MySpace in 2008 when News Corp.'s digital operations missed the goal of $1 billion in revenue, leading the company to reorganize operations and raising questions from analysts about the unit's prospects.

News Corp. bought MySpace in October 2005 for $580 million and less than a year later signed a three-year, $900 million search and advertising agreement with Google.

The deal expired in June and was extended until the two sides reached a new agreement in December, without disclosing upfront and guaranteed payments as in the previous arrangement.