Murdoch Adding to Online Empire
News Corp. added to its Internet war chest Thursday, agreeing to pay $650 million for IGN Entertainment Inc., which owns several websites aimed at video game players.
The deal is News Corp.’s third Internet acquisition since July and brings the company’s total spending on Web properties to about $1.5 billion -- just shy of the $2 billion Chairman Rupert Murdoch told Wall Street he would invest to build an online presence.
In addition to IGN, News Corp. has agreed to buy Scout Media Inc., a sports website, and MySpace.com, a fast-growing “social networking” site. The company was negotiating to buy the Blinkx search engine, but sources close to News Corp. said those talks have broken down.
Analysts said Thursday that snaring Brisbane, Calif.-based IGN would catapult News Corp. to fourth place in the Internet ranks behind Yahoo Inc., Time Warner Inc. and Microsoft Corp.’s MSN. IGN’s sites -- which include IGN.com, GameStats.com, RottenTomatoes.com and AskMen.com -- have 28 million unique monthly users and would bring News Corp.’s user total to 70 million.
Shares of New York-based News Corp. rose 3 cents to $16.55.
News Corp. executives said IGN sites could be used for more than downloading games.
“This can be the basis for the digital distribution of entertainment, if we wanted to deliver original content, films or TV shorts,” said Ross Levinson, president of Fox Interactive Media, a division Murdoch created in June to oversee websites companywide, including those of Fox Broadcasting, Fox Sports, Fox News Channel and the Fox television stations.
The deal for IGN marks the second time that Murdoch has beat rival Viacom Inc. to the punch in building online portfolios that target young consumers, sources said. Viacom was negotiating to buy MySpace.com before Murdoch swooped in with his $580-million cash offer to clinch the deal in July.
Sources say Viacom, which in June agreed to pay $160 million for Neopets.com, a website that lets children create and care for virtual pets, also was a leading contender for IGN.
Both IGN and MySpace would have been well-suited companions to Viacom’s MTV cable channel because they are edgy and popular with teens. For example, IGN’s RottenTomatoes.com is an irreverent movie review site that, among other things, advises which movies might prompt viewers to fling decaying garden vegetables at the screen.
The race between the media giants is being fueled in part by the $9.6 billion spent on Web advertising last year. As advertisers have begun shifting spending to the Internet from traditional media such as television and radio, Viacom and News Corp. have hastened to expand online.
But some say competitive pressures may be forcing Murdoch to pay top dollar.
Merrill Lynch’s Jessica Reif Cohen said the purchase price for IGN, which has never turned a profit, was steep. Other analysts, however, said the company’s value was difficult to judge given IGN’s swift growth.
For his part, Levinson sounded confident.
“If you believe that the 13- to 30-year-old demographic is important, and if we can execute on the plan, whatever we paid today won’t seem like a lot of money,” said Levinson, who was en route Thursday to a two-day retreat with Murdoch and News Corp. President Peter Chernin to discuss the company’s Internet strategy.
Some Wall Street sources said that Murdoch was so afraid Viacom was about to snap up IGN that he bid for the company before doing a thorough review of its financial statements.
The sources said IGN bluffed Murdoch into thinking a deal with Viacom was imminent even though the rival had already backed away from the bargaining table.
Levinson, however, said News Corp. had been talking with IGN on and off since March, giving the company plenty of time for such due diligence.
According to sources close to the negotiations, News Corp., along with Viacom and Comcast Corp., are said to have passed on the opportunity to buy IGN earlier this year because of the asking price, which at one point surpassed $800 million.
News Corp. stepped back into the picture Tuesday, wrapping up the deal after working through the night Wednesday, sources said.
IGN filed with the Securities and Exchange Commission in July to sell as much as $200 million of stock in an initial public offering, but never followed through.
