Last updated: November 17, 2006 1:34 am

Architect of News Corp’s net strategy quits

The architect of News Corp’s successful internet strategy was replaced abruptly on Thursday night, marking the second upheaval at the top of one of the major online media businesses in as many days.

Ross Levinsohn, head of Fox Interactive Media, was replaced a day after Time Warner dropped Jonathan Miller, former boss of AOL. Both men have been replaced by more experienced executives from the television business, reflecting the growing importance of video programming to the major internet portals.

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Fox described the departure of Mr Levinsohn as “mutual.” In a statement, Peter Chernin, president and chief operating officer of News Corp, praised the executive for having done “an incredible job over the past couple of years launching News Corp’s internet division from scratch and building one of the most innovative destinations on the web.” He went on to suggest, though, that “at this point in FIM’s evolution” the internet business needed to be run by an executive with deeper experience to handle the complexities of digital entertainment as it turned into a mainstream business.

From November 27, the News Corp internet business will be run by Peter Levinsohn, a 20-year veteran who was described by one person who knows him as a “distant cousin” of Ross Levinsohn.

Ross Levinsohn, former head of Foxsports.com, was among a group of News Corp executives who were called together last year to hatch a drastic change of online strategy for Rupert Murdoch’s media empire. He was instrumental in recommending the acquisition of a series of internet companies, including social networking phenomenon MySpace, and went on to oversee their integration into the group.

Since being acquired by News Corp for $580m a year ago, MySpace has continued to grow rapidly, and earlier this week Mr Murdoch speculated that it might now be worth as much as $6bn. The position of Mr Levinsohn, who was credited with overseeing the successful integration of the company, was not thought to be in doubt. A week ago he represented News Corp at an internet conference in San Francisco, where he gave no hint of the changes that were to come.

While Ross Levinsohn had taken a successful entrepreneurial approach to the rapid growth of the business, News Corp now wanted to put the internet division into the hands of a more experienced entertainment executive, according to a person familiar with its thinking. Peter Levinsohn had been head of digital media for the Fox Entertainment Group since 2004.

Earlier in the day, Mr Murdoch told investors that MySpace could fetch $6bn if sold today, according to a research note from UBS.

Mr Murdoch, who met on Wednesday with some investors on the sidelines of a shareholders’ meeting in Adelaide, Australia, also forecast that the number of registered MySpace users could rise from 130m to 200m by next June.

In his research note, Aryeh Bourkoff, a New York-based analyst working for UBS, said: “News Corp views MySpace as its digital centrepiece.’’

UBS, however, values the larger Fox Interactive Media business, which includes MySpace, at $2bn.

The price tag suggested by Mr Murdoch echoes the spiralling internet valuations of the late 1990s, before the burst of the dotcom bubble in 2000.

Still, News Corp is aggressively expanding MySpace’s reach by opening more sites in countries such as Germany and France.

Last week, MySpace also agreed to form a 50-50 joint venture with Softbank, the Japanese internet and telecoms conglomerate that will result in a fully-fledged Japanese version of the social networking site next year. MySpace is now adding about 8m users globally every month.

Mr Murdoch’s price estimate also comes amid heightened takeover activity in the online sector. Industry leaders are scouting for fast-growing companies, as shown by the recent decision by Google to buy YouTube, the video downloading site founded by Chad Hurley and Steve Chen, for $1.65bn.

Although News Corp has switched its headquarters to the US, Mr Murdoch continues to wield considerable political influence in his native country, sparking a debate on Thursday over tax policy after lambasting Peter Costello, the Australian treasurer, for sitting on a “big, fat” budget surplus rather than lowering corporate taxes.

He also attacked the Australian government for not having done enough to boost broadband capacity.

Mr Murdoch’s Australian media empire is likely to make him a key player in an anticipated shake-up of the country’s media sector, following a political agreement to ease some of Australia’s long-standing ownership restrictions and allow more investment across the sector.

He insisted, however, that his recent decision to purchase a 7.5 per cent stake in rival media group John Fairfax was “just strategic”, a way of ensuring that it would be harder for somebody else to take over the group.

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