From www.Bloomberg.com -- News Corp.’s MySpace social- networking unit fired almost 30 percent of its staff to save money in response to falling advertising sales and user gains by larger rival Facebook Inc.
The cuts lower U.S. staffing at Los Angeles-based MySpace to 1,000, according to a statement today. Dani Dudeck, a MySpace spokeswoman, declined to comment on specific locations, severance costs or how much money may be saved.
The moves are part of an effort to lower costs amid falling revenue at News Corp.’s Fox Interactive Media, the division that includes MySpace. Digital media boss Jonathan Miller, appointed by Chief Executive Officer Rupert Murdoch in April, has already replaced MySpace’s management, bringing in former Facebook executive Owen Van Natta [pictured].
“Our staffing levels were bloated and hindered our ability to be an efficient and nimble, team-oriented company,” Van Natta said in a statement. He called the moves “necessary for the long-term health and culture of MySpace.”
U.S. marketers will spend an estimated $495 million this year at MySpace, a 15 percent drop from 2008, according to estimates from researcher eMarketer.
Miller, a former AOL executive, hired Van Natta to replace MySpace founder Chris DeWolfe as CEO in April.
Facebook has 850 employees. The Palo Alto, California-based company, already the social-networking leader worldwide, surpassed MySpace in the U.S. last month, according to ComScore Inc. Facebook’s advertising sales are expected to rise 20 percent to $300 million this year, New York-based eMarketer said in a May report.
Sales Decline
Fox Interactive’s revenue declined 11 percent to $187 million in the quarter ended March 31 from a year earlier, primarily because of a 16 drop in advertising, while costs rose.
A $300 million annual advertising agreement with Google Inc. expires next year. Renewal is unlikely to be “anywhere near” the current deal’s size and “dramatic” job cuts are needed to help reduce costs and spur growth, Richard Greenfield, a New York-based analyst with Pali Capital, wrote in a June 10 research note. He recommends selling News Corp. shares.
Fox Interactive scrapped a $350 million plan to consolidate in new office space, the Los Angeles Times reported on June 6.
News Corp. has been cutting expenses at its TV stations and newspapers to counter an advertising slump. Operating income in the fiscal third quarter declined 47 percent. The New York-based media company forecasts operating profit for the year ending June 30 to fall 30 percent.
News Corp. fell 38 cents to $9.43 at 1:50 p.m. New York time in Nasdaq Stock Market trading. The shares had increased 7.9 percent this year before today.
