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News Corp. Acquires IGN for $650 Million

The $650 million acquisition of IGN Entertainment is further proof that News Corp. is moving quickly to become a major Web player

By the end of this year, IGN Entertainment will officially be a part of News Corp.'s newly minted Fox Interactive Media unit. IGN is the third Internet acquisition this year for the media giant, which has been seeking ways of increasing its online presence. You have to wonder, will GameSpot parent company CNET be next on Murdoch's list?

Media mogul Rupert Murdoch, News Corporation's Chairman and Chief Executive Officer, is now very much a part of the video game industry, as News Corp announced today that it "signed a definitive agreement" to purchase IGN Entertainment, Inc. for approximately $650 million in cash.

News Corp. snatching up web companies
Under the terms of the agreement, IGN and its network of sites, which includes TeamXbox, GameSpy, Rotten Tomatoes, AskMen.com, sites within the Vault and Planet networks and more, will become part of News Corporation's Fox Interactive Media unit. IGN's chief executive officer, Mark Jung, will continue in his role and will report to Ross Levinsohn, President of Fox Interactive Media, once the deal is completed. The transaction is expected to close during the 4th quarter of this calendar year.

The acquisition is in line with News Corp.'s latest strategy to further expand into online entertainment and media. This is actually News Corp.'s third Internet acquisition this year, following the purchases of Scout Media, a sports web publisher, and Intermix, which operates the popular social networking website MySpace.com.

Those who have been following Murdoch's moves closely may have seen the IGN acquisition coming. Once skeptical about the Internet as a medium, Murdoch warned during a speech this past April to the American Society of Newspaper Editors that "digital immigrants" would have to accommodate the younger generation of "digital natives". Only a few months later, he then vowed to spend upwards of $2 billion on web acquisitions. And just last month, in a conference call Murdoch stressed "there is no greater priority for the company today than to meaningfully and profitably expand its Internet presence." According to The Wall Street Journal, News Corp. beat out another media company, Viacom Inc., to purchase IGN.

Massive page impressions
IGN has approximately 28 million unique users. Adding that to News Corp.'s other sites gives the company U.S. web traffic of nearly 70 million unique monthly users and more than 12 billion page impressions per month. News Corp. also said it will take the opportunity to cross-promote Fox's television and film content and that IGN's network would "enable the company to more efficiently introduce new products and services using its enhanced web presence."

"With the acquisition of IGN and its 28 million unique users, we have gone a long way toward achieving two of our key strategic objectives in our efforts to become a leading and profitable Internet presence," commented Murdoch. "First, we have significantly enhanced our online reach, strengthening our position as the fifth most trafficked presence on the web. We also become the fourth largest network in terms of monthly page impressions. And second, we have furthered our strategy to leverage the unique competencies the company enjoys with its news, sports, and entertainment assets to create a leading Internet destination. By acquiring IGN and its compelling sites, we now have top entertainment sites to go along with FOXSports.com, as well as our myriad news sites, headlined by FOXNews.com."

Mark Jung added, "We believe that Fox Interactive Media is an ideal fit with IGN Entertainment. With this combination, our users will enjoy access to a broad array of content and services covering video games, music, movies, sports and news, and our advertisers will benefit from enormous reach into a highly sought-after demographic. We are thrilled with this acquisition and can't wait to get started."

News Corp.'s Internet buying spree certainly is aggressive, but the media giant seems to be pursuing the right online properties, points out Rich Greenfield, analyst with Fulcrum Global Partners LLC. "They are aggressively buying their way into an Internet strategy from nowhere three months ago," Greenfield told Reuters. "They're going after Web properties that mirror the demographic of the viewer of The OC ... (following) the activities of what those same consumers do online."

IGN has come a long way since it launched in 1997 as part of Imagine Media. In '99 the company went public as Snowball.com, but then changed its name to IGN Entertainment and went private after the dot-com bust. With Internet companies seeing a resurgence of late, IGN filed for an initial public offering this summer and drew the attention of media giants like Viacom and News Corp. IGN, however, has still not turned a profit according to its SEC filings. That being said, the company's revenue for the first-half of 2005 more than doubled to $28.7 million from $14.1 million a year ago and its net loss narrowed to $7.5 million from $11.6 million.

Is CNET next?
With the news of IGN's acquisition today, could CNET, which owns GameSpot.com, be next? As Rick Munarriz points out on business website The Motley Fool, "Both IGN and Gamespot are likely to lure a whole lot of traffic in the near term; all three video game console makers will be rolling out their next-generation systems over the next year. An attention-hungry empire would hate to miss out on that traffic."

Even if a purchase of CNET would prove too expensive to News Corp. in the wake of all their recent acquisitions, it's entirely possible that Viacom or another media company could step in.

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