MySpace Debacle Vindication For Fired Viacom CEO Tom Freston

Viacom chairman Sumner Redstone stunned the entertainment industry in 2006 when he fired CEO Tom Freston. One of the chief reasons for the move was that Freston hadn’t moved decisively enough to buy MySpace, enabling Rupert Murdoch to pick up what was then the most popular social networking site for $580 million. Redstone seemed to think that contributed to the 20% drop in Viacom’s stock price in 2006 up to the date of Freston’s ouster. The CEO’s successor, Philippe Dauman, would “never, ever let another competitor beat us to the trophy,” Redstone told analysts. Redstone told interviewer Charlie Rose that losing MySpace had been “humiliating,” adding, “MySpace was sitting there for the taking for $500 million.”

But who’s laughing now? MySpace has collapsed into a distant also-ran behind Facebook and Twitter. And Murdoch took a bath on MySpace this week. He wanted $100 million for it but sold 95% of his interest to ad company Specific Media for a mere $35 million. Just imagine what would have happened to Viacom’s stock if Redstone’s passion for chasing fads led him to outbid Murdoch. It’s hard to believe that the owner of MTV would have seen what Murdoch didn’t — that social network fans were being turned off by MySpace’s tawdry commercialism as it established itself as a music and entertainment portal. That provided the opening for Facebook and Twitter to position themselves as safer alternatives for people who simply want to connect with friends.

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UPDATE: Justin Timberlake Will Take Stake In MySpace After News Corp Sells Site For $30M-$40M To Specific Media

By | Wednesday June 29, 2011 @ 3:16pm PDT

UPDATE: 3:16 PM: The official release from new MySpace owner Specific Media had an interesting bit of news in it: Justin Timberlake will take an ownership stake in the social-media site “and play a major role in developing the creative direction and strategy for the company moving forward.” It’s unknown how much he is investing in the deal, in which seller News Corp receives a minority equity stake in Specific, but it makes sense in that MySpace had become a de facto music promotions site since being essentially left in the dust by Facebook. Specific Media and Timberlake say they plan to evolve Myspace into the premiere digital destination for original shows, video content and music. ”There’s a need for a place where fans can go to interact with their favorite entertainers, listen to music, watch videos, share and discover cool stuff and just connect. MySpace has the potential to be that place,” Timberlake says in the release. “Art is inspired by people and vice versa, so there’s a natural social component to entertainment. I’m excited to help revitalize Myspace by using its social media platform to bring artists and fans together in one community.”

PREVIOUS, 11:47 AM: It was such huge news back in 2005 when News Corp plunked down $580 million for the web’s hottest social-networking site MySpace. It makes today’s news maybe even bigger: News Corp has agreed to sell the site to ad-targeting firm Specific Media for $30 million-$40 million, the Wall Street Journal is reporting, well below its $100 million asking price. Read More »

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