Week in review: News Corp. and fiestas

(from the TC+M web site on Friday if you missed it...)

It's been another good week for big fish eating up smaller fish in the media world. This week that seemed to largely translate to big media giants consolidating smaller social media plays into their strategies.

On the same day that CBS snapped up the hipster online radio community last.fm for a relatively modest sum of $280m,, News Corp.'s online division, Fox Interactive, itself bought up two more social networking sites: the online photo organising site Photobucket and Flektor, a site that lets users create mashups, slide shows and other presentations of their user-generated content.

The two unknown-value deals will give News Corp.'s social networking sites, namely MySpace, another way of trying to monetise its still-growing user base.

Both sites are already popular with MySpace users who use them to incorporate graphics on their pages, so in a sense it was a matter of solidifying a relationship already in place.

It will mean that Fox will be able to embed the functionality of Photobucket and Flektor directly into its own site, which will make the experience easier for users.

But more importantly it helps the company consolidate any traffic that might be passing through Photobucket's and Flektor's services for its own financial gain.

This in fact was a touchy subject between Photobucket and MySpace only weeks earlier. MySpace had started blocking Photobucket usage when it said the image sharing site was using its service to encourage users to run ad-supported slideshows on their pages.

Now that MySpace owns the two sites, any potential ad revenue gained in such a way will be theirs to keep.

According to Fox, the two products will continue to operate as standalone entities and will still be able to be used on other sites like YouTube and Facebook.

(For a closer look at the Last.fm deal with CBS, you can read a blog entry I wrote on the day of the deal. There will also be a longer analysis, including an interview with one of the Last.fm founders, in the upcoming monthly issue of TC+M, out in two weeks).

Burritos in China
Saw an interesting item on the wires today about how Grupo Televisa, the largest broadcaster in Mexico, has done a deal with the Chinese government to export its reality TV shows and soap operas to the Mainland. Chinese broadcasters, like broadcasters in many other parts of the world, already dub Mexican programmes for their market, but this deal will let Chinese producers recreate the various shows for their own market.

The terms of the deal were not disclosed. But what stands out about this to me is that despite the huge potential of the Chinese market, there seems to be a distinct dearth of content to fill the airwaves.

Back in Mexico, the Chinese government broadcaster CCTV will be providing a feed of its channel to Grupo Televisa, who will deliver it in its domestic market dubbed.

The two countries of China and Mexico may have more in common than previously thought, in addition to their tastes for telenovelas and raucous variety shows with mariachi bands. This week, the high court in Mexico struck down a ruling that effectively lets the country's two dominant TV companies, Grupo Televisa (70% of the market) and TV Azteca (30% of the market), to continue to stay on top. In fact, the CCTV deal shows that today there is an opening for smaller new channels to emerge, but it takes a deal with a big player to make it happen. Perhaps in the future you won't need a tie-up with one of the big-two to do this.

MySpace moves up the age ladder

Is MySpace getting older and wiser?

Yesterday the News Corp.-owned social networking giant launched their new 'professional content' video service. (This is presumably where the News Corp./NBC Universal video will fit in once it is rolled out this summer.)

Of course most of MySpace's new video partners will be serving the 16-24 user base that makes up the bulk of MySpace members: Kush TV, LX.TV, Ripe TV, Octane TV, Flow, Young Hollywood and VBS.tv will be among the companies supplying content to its new lifestyle and news channels.

But other partners - National Geographic, the New York Times and Reuters - are definitely more synonomous with a distinctly older kind of consumer.

True, one of the sample segments from Reuters will be 'off-beat news stories from around the world' (and won't those be funny!) but there is every possibility that MySpace will tap more of what Reuters is known for--financial data and analysis--as (and if) the partnership develops.

The deal also gives companies like National Geographic and New York Times another way of trying to refresh their own demographic pools, which are of course getting older too.

Last week's Week in Review

This story was originally posted last Friday on TCM's web site

It's been a curious week for results reports. All looks very good on the surface, but not so great deeper down. Google said that for the fourth quarter, its net profit nearly tripled over the quarter last year to $1.03 billion from $372.2 million. But nevertheless its shares were sent down on the news and are still trading down two days later.

What gives? There were different reasons floating around explaining why: some believed the market's response was because people have become inured to the Google good-news wagon, and what they really need to see is wildly excellent news to be enthusiastically buying up the stock, which is already trading at sky high prices of just under $500/share.

Others in the investment community say they are getting concerned with Google's business model being too focussed on a single revenue stream. The reality of breaking into all the new markets that they'd like to tackle to grow their business - online video (with YouTube), online payments (using Checkout), and putting their advertising model onto other media like newspapers - could be more costly than originally expected.

The online shopping giant, Amazon, provides an instructive example for Google about what this can mean to the bottom line in the longer run. Amazon had beat analysts' expectations for the fourth quarter on sales of $4 billion, an increase of 34% on the year before. But while still profitable, with sales of $98 million, this number was down significantly on sales of $199 million for the quarter a year ago, and is its lowest profit margin since 1999. This rather huge drop has been attributed to shrinking margins: its traditional businesses of selling books, movies and other items online has matured, and it's been spending a lot of money trying to shift products in new areas, like toys and electronics.

The lesson here might be that Google needs to get some value creation in those new areas before the old, established ones start to really fade.

Comcast, the US cable operator, is another company that's reported a tripling of profits for the quarter. With a lot of their growth coming from a welcome triple-play boost of customer spend, Comcast is going to reinvest a chunk of their money on expanding their telephone services. Their new attention could not be coming at a better time: they were also in Washington this week filing an appeal with the FCC over a recent set-top box ruling that will force them to 'open' their STB's to competitors' services. With the huge influx of new companies out there offering video on demand and other TV-based entertainment, this could seriously disrupt Comcast's (and other pay-TV providers') bread and butter.

Over in the UK, the satellite broadcaster owned by News Corp., BSkyB, also reported some healthy numbers on the back of triple play excitement. We'll be providing a full analysis of what they are doing in our launch issue of TCM magazine, which will be out in a couple of weeks.

Yo space or Myne?
Emap is the latest media company to try to follow the News Corp. example of getting into social media by acquiring an existing user-generated content player. Today it announced it bought Yospace Technologies, for £8.7m, with a possible further £5.7m in deferred payments based on their performance between now and March 2010. Yospace is behind a number of social-networking sites like "See me TV," a video sharing site designed for mobile operator 3 (which happens to have a content deal with Emap…). Three has claimed that it has had huge success with its video service, thanks largely to See me TV.

The price that Emap's paying for Yospace is a tad less than the $580 million that News Corp. forked out for MySpace. Yospace made a loss of £480,000 in 2005 (no figures for '06 have been released), and it's not yet clear that MySpace is turning a profit, either. No matter how much you pay for social networking, it's still not clear whether it will pay back.