News Corporation on web buying spree

The News Corporation has been giving new meaning to the term e-commerce: the company has been on an online buying spree, spending nearly US$1.5 billion on three internet companies in just the last seven weeks.

The New York Times reports (9 September) that its swiftness in agreeing to pay US$650 million to buy IGN Entertainment, an internet game and entertainment site, in a deal announced yesterday, underscored just how serious - one of his executives says "obsessed" - the chairman, Rupert Murdoch, is about replicating in cyberspace the kind of power he has in media arenas like British newspapers, Hollywood and cable television news.

According to the newspaper, executives involved in the deal said that as of Tuesday, Mr. Murdoch and Peter Chernin, the News Corporation's president, were informed by the head of their newly created interactive media division that IGN, with whom they had held intermittent talks since March, was on the verge of being sold to Viacom. (A Viacom spokesman declined to comment.)

The newspaper says that Mr. Murdoch was told that he would have only a short time to come up with a counterbid, but if he agreed to pay US$650 million the company would be his. Within 36 hours, he and Mr. Chernin had met with Mark Jung, IGN's chief executive, in New York, brought in bankers and lawyers, and agreed to the terms. "They got wind that we had been in other conversations, and moved heaven and earth to get a deal done," said Michael A. Kumin of Great Hill Partners, IGN's largest shareholder, who handled the negotiations.

According to the NYT report. Mr. Murdoch has said he is willing to spend up to US$2 billion on internet acquisitions, and in addition to IGN has recently acquired Intermix Media, the parent of the popular social networking site MySpace.com, for US$580 million and Scout Media, a sports site, for US$60 million. This weekend, Mr. Murdoch is holding an internet meeting for his top managers from around the world near his ranch in Carmel, California, where he is expected to discuss the progress the company has made since a similar gathering in February.

The newspaper says that what they will hear is that the purchases of MySpace and IGN in particular represented the best opportunities the company identified for quickly bolstering its presence online, when measured in terms of internet traffic. Mr. Murdoch has been particularly concerned about younger audiences spending less time reading newspapers and watching television, while spending more time online and embracing such features as interactivity and virtual communities.

The NYT says that when the deals close, traffic across all of News Corporation's internet properties - which include the web sites of dozens of newspapers and scores of TV stations it owns - will have increased to nearly 70 million unique monthly users from fewer than 25 million. According to Merrill Lynch, the estimated 12 billion monthly page views News Corporation will generate with IGN will rank it fourth among all companies online, behind Yahoo, Time Warner and MSN, but ahead of eBay and Google.

The company's challenge now, Mr. Chernin said, is figuring out how to integrate its new online businesses with one another as well as the huge amount of content the company owns and produces.

The newspaper reports that both Mr. Chernin and Mr. Murdoch are now spending much of their time on internet strategy, though the internet represented a small fraction of the company's US$23.8 billion in annual revenues last year.
News Corporation's online strategy this time around differs from its previous efforts. Rather than taking small stakes in promising start-ups, it is focusing on buying companies outright that are somewhat proven and generating operating earnings.

The Internet strategy is being handled by a new division called Fox Interactive Media, based in Los Angeles and led by Ross Levinsohn, a former executive at Foxsports.com. Mr. Levinsohn said Mr. Murdoch tapped him several months ago to come up with an online strategy and advised him to "think about where we should be in 10 years and work your way backwards."

Mr. Levinsohn came up with a list of eight internet companies that he believed could be potential acquisition targets or partners; with IGN, the company has acquired three of them, reports the NYT.