OFF THE GRID

Why MySpace and the Internet Could Kill Rupert Murdoch

Feb 15, 10 | 8:05 AM   byMichael Wolff
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One of the many things that Rupert Murdoch is good at is dealing with failure. It is worthy of a business school case study how News Corp. has so often managed not to acknowledge or be blamed for its messes. This includes DirecTV, TV Guide, his MCI satellite joint venture, his great investment in China, the Times of London, pretty much every newspaper he’s bought in the US, including, perhaps most notably, the Wall Street Journal, as well as all of Murdoch’s Internet ventures—Delphi, iGuide, Pagesix.com, and, most recently, MySpace, briefly the crown jewel of News Corp.

Sometimes he merely manages failure, as with the Times of London and the New York Post, whose losses he has shouldered for more than 30 years (representing, quite possibly, the largest aggregate loss of any media properties ever). Other times, he declares victory and sells off a troubling asset, as with DirecTV (he spent six years trying to acquire the company, then almost immediately got rid of it). Other times he just disappears the problem, as with most of his Internet investments (who even remembers them?). The job is not to be caught; the job is to keep others from perceiving him as a failure.

In this regard, MySpace is going to be a challenge. Murdoch’s own public frustration puts a light on the problem. He has, in quick succession, fired two managers. Chris DeWolfe, its founder, went a year ago. Last week, DeWolfe’s replacement, Owen Van Natta, got the axe. What’s more, this past year, Murdoch hired Jonathan Miller, the former CEO of AOL, to solve the problem, which so far is intractably resistant to solutions. Miller is a curious choice for the job since he failed to rescue AOL.

In 2007 News Corp. believed it could do a deal with Yahoo that would have valued MySpace at $25 billion. Now, few people believe MySpace is worth much more than the $580 million News Corp. paid for it. That’s the good news: Murdoch hasn’t lost money on the company.

The bad news for Murdoch is that it truly confounds him—keeps him up at night. It’s a nuisance he can’t shake. It confounded him when he bought it (the original plan was to buy a gaming company, but then he got talked into MySpace), telling people (anyway, he told me) he was in the “stalking business.” Then, his wife Wendi’s interest in the company meant he had to hear about it all the time, which bored him, and, worse, she was constantly traveling in her various positions with MySpace (Murdoch himself was never sure what she did), leaving him at home with the children (quite a reversal in his historical marital role). Perhaps most unnerving were the constant rumors—which he had to embarrassingly discuss with his PR people—that Wendi was having an affair with DeWolfe.

Still, there was a period where News Corp.’s stock really went up because of MySpace. People even started to think he wasn’t the same old rotten Rupert because of MySpace—rather, he was some kind of genius.

Then came Facebook—out of nowhere. He would get people to try to explain to him why Facebook was gaining and MySpace all of a sudden losing, but almost instantly he’d become bored or irritated by this discussion. The need for better, newer, smarter technology was something an old cheapskate newspaper man just didn’t understand.

I tried once to make him feel better about MySpace. It was a hapless effort: Every traditional media company that’s bought a significant Internet company has failed, I said, brightly. I received a memorable scowl.

He may still retreat and practice his old black magic of making his errors disappear. But something’s got him. Something about this bloody Internet has really gotten under his skin.

More and more, it feels like a death match.

More of Newser founder Michael Wolff's articles and commentary can be found at VanityFair.com, where he writes a regular column. He can be emailed at michael@newser.com. You can also follow him on Twitter: @MichaelWolffNYC.
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