News Corp sales pitch: MySpace isn't going down the toilet

April 12, 2011 8:12 PM
Tom Cheredar

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TechCrunch’s Mike Arrington recently took a look at News Corp.’s pitch book to sell the decaying social property that is Myspace.

What’s apparent from the book is that Myspace is badly hemorrhaging money, despite the all too optimistic sales pitch that’s been given to potential buyers (think used car salesman).

First of all, News Corp. conveniently leaves out financial history of Myspace, which in 2008 was hitting $900 million in revenue, and focuses entirely on the present and immediate future.

Myspace’s projected revenue for the fiscal 2011 year? Just $109 million, despite $274 in expenses that brings it to a total loss of $165 million over the 12 month financial period ending June 30, 2011.

The pitch goes on to say that the company will have $15 million in earnings before interest, tax, depreciation, and amortization (ebitda) in 2012. In order to achieve that figure, they predicted revenue would decrease to $84 million and expenses would drop to a much lower $69 million. Considering the discrepancy between the company’s current expenses, it’s likely that Myspace will have to make massive changes that almost certainly point to layoffs and other cuts.

The pitch forecasts revenue growth in the years thereafter, ending with $139 million in 2015.

You can’t blame News Corp. for trying to spin the company in the best possible light, since they are trying to get rid of it. But, I can’t imagine who would want to buy the site at this point even if it is an embarrassingly good deal.

NURREDIN

What's happening to Myspace is eventually going to happen to Facebook. Murdoch tried all he could to make a profit,but financial analysts have come to realize that Myspace and Facebook have the same business model as newspapers: their income is derived from advertising (and without the subscription fee). People DO NOT use social media to buy things,they use it to SOCIALIZE. People left Myspace in droves because they were sick of the ads and the obnoxious bands on the site. We now know that social media users have a 1% “click through” rate for advertisers. If and when Facebook has an I.P.O., they will have to reveal all their numbers and they will have to attempt to make a profit. The numbers just don't add up. If Facebook only spends $1.00 per year to maintain each Facebook profile (which I doubt is that low) we're talking $500 MILLION per year just for server space! Are they pulling in that much every year in ad space sales? There's a reason Myspace is losing money. They tried to make a profit and the “customers” ran away. If Facebook tries to turn a profit,the same thing will happen unless they start charging people to maintain a profile. I don't see that happening. I don't see Facebook or Myspace being around in five years.
http://venturebeat.com/2011/06/27/myspace-layoffs-3/ Myspace laying off 150 employees ahead of company’s sale? | VentureBeat

[...] parent company News Corp has been extremely unsuccessful in its effort to sell the company. The latest round of layoffs is part of an effort to make Myspace [...]
http://venturebeat.com/2011/06/28/myspace-sale/ Myspace finalizing $30M sale of the company | VentureBeat

[...] News Corp. is apparently in a rush to complete an acquisition deal by Thursday — its fiscal year-end. The media giant probably doesn’t want MySpace to blemish its 2012 financial records, especially given the lack luster revenue predictions. [...]