MySpace slashes global staff

2011-01-12 15:25

kalahari.com

Los Angeles - Struggling entertainment site MySpace said on Tuesday that it is cutting nearly half of its staff worldwide, or about 500 people, after an extensive revamp in October overhauled its look and allowed it to be run with fewer people.

The cuts, part of a two-stage layoff plan, better position the site for a possible sale or spin-off by parent News Corp.

Mike Jones, the chief executive of MySpace, called the cuts "tough but necessary" but said they put the site on a path to profitability while making it more nimble and entrepreneurial.

MySpace declined to say how much the cuts would save.

A person with close ties to the site said that the cuts, combined with a previous round of layoffs and office closures in June 2009, would save more than $200m a year.

Not competing


The previous layoffs eliminated about 420 jobs in the US and 300 jobs overseas, and shut several offices abroad. For the latest move, MySpace said it will enter into ad sales partnerships in the UK, Germany and Australia.

The person was not authorised to speak publicly and declined to be identified.

The recent re-launch focused MySpace on giving its users, mostly aged 13 to 34, more ways to consume music, videos and celebrity gossip. Before, MySpace tried to be an all-purpose social networking site like Facebook. MySpace recently said it is no longer trying to compete with Facebook.

Executives had expected the changes to turn off some users, and its visitor count has indeed fallen since the makeover. But the cuts and a tighter focus on younger users could still help it make money as a smaller company.

It is now relying more on selling space directly to advertisers, by integrating their ads with content, and less on its revenue sharing deal with search leader Google Inc which it renewed in December, the person said.

Globally, MySpace had 81.5 million visitors in November, down from 88.0 million in October and down from 108.1 million in November 2009, according to tracking firm comScore Inc.

Meanwhile, Facebook visitors hit 647.5 million, up 48% from a year ago, comScore said. Microblogging site Twitter has grown 71% in a year to 103.0 million.

Profitable


News Corp bought MySpace in 2005 for $580m, but it has been losing money consistently. In the three months to  September 30, the "other" segment housing MySpace lost $156m, about $30m more than the previous year, mostly because of lower search and ad revenue at MySpace.

By contrast, juggernaut Facebook is making money. According to documents recently shared with prospective shareholders, Facebook earned $355m on revenue of $1.2bn in the first nine months of 2010.

News Corp executives had put MySpace on a short leash to get profitable. News Corp Chief Operating Officer Chase Carey told investors in November he would judge efforts to reboot the site "in quarters, not in years" and opened the possibility the site could be sold.

Since then, News Corp executives have been fielding inquiries from strategic investors. Possible moves include an outright sale, taking on new investors, or merging the asset into a larger company for an equity stake, the person said.
- AP
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