Correction to This Article
An article and graphic in the Aug. 22 Business section incorrectly said Fox Mobile Entertainment is located at the Fox Interactive Media headquarters in California. The building houses Fox Interactive Mobile, which puts Fox's Web content on wireless devices.

Fox's Digital Empire, Going Up Floor by Floor

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By Frank Ahrens
Washington Post Staff Writer
Tuesday, August 22, 2006

BEVERLY HILLS, Calif. -- One roof, hundreds of millions of Internet viewers.

In a glass-and-stone building on a leafy side street, media giant News Corp. has consolidated some of the hottest trend-setting properties of the online world.

The third floor is where 300 employees of MySpace.com help some 100 million young people post profiles on the Internet's most popular Web site, creating a prized advertiser demographic. One floor below is the home of AmericanIdol.com, which shares space with FoxSports.com and Fox Mobile Entertainment. On the ground floor are Fox's digital labs, where new ideas are dreamed up, implemented or discarded.

In all, this building of 700 employees is the hub of Fox Interactive Media, the year-old digital division of parent company News Corp., created with last summer's purchase of MySpace. Its job: Figure out a way to make serious money from delivering mobile and Internet content and wring advertising revenue from MySpace. Chief executive Rupert Murdoch has projected that Fox Interactive's revenue will top $660 million by the end of next year.

But serious money is still a ways off -- this month, the News Corp. division that includes all digital assets reported $1.4 billion in revenue for the past 12 months. (The company does not break out Fox Interactive revenue.) The figure is one-quarter what the company's movie studio made over the same period and makes Fox Interactive part of News Corp.'s second-smallest division. Indeed, the division lost $150 million in operating income over the past year, the only News Corp. division to dip into the red.

Each of the major media companies has a similar division or divisions focusing on digital content and distribution, but none of the others has herded its major players into one building and tried to create an integrated unit from the ground up, as News Corp. has.

In an e-mail, Murdoch called Fox Interactive "vital to the long-term future of the company" and proclaimed its first year "a great start but, of course, I'm not content."

Many media mergers of the past few years can be found buried under a tombstone inscribed with the word "synergy." America Online and Time Warner Inc. were supposed to have content synergy, with Warner Bros. television shows and movies shown over the Internet via AOL. Never happened. News Corp. swerved perilously close to its own first-gen Internet debacle in 1997, offering $450 million for PointCast Inc., a start-up that "pushed" content to users, before the deal fell apart and the company failed in 2000.

In Beverly Hills, Fox Interactive Media employees half-jokingly talk about "FIMergy."

"So much more gets done when you're face to face," said Fox Interactive president Ross Levinsohn, noting that the physical proximity of key players helped quickly close a recent $900 million deal with Google Inc. to handle search on MySpace.

News Corp. acquired MySpace when it bought parent company Intermix Media Inc. Murdoch's company got more than just the world's biggest Internet hangout -- it got social-networking software that can be applied across several Web sites. AmericanIdol.com, for instance, "took the tool set" from Intermix to create MyIdol, said AmericanIdol.com Vice President Jeff King. MyIdol is a membership-based, ad-supported spinoff site that lets fans blog about the show, post profiles, message one another, listen to music, and even submit their own songs to be played on the site and voted on by other fans.

But being under the same corporate parent does not necessarily ensure seamless cooperation among siblings.


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© 2006 The Washington Post Company

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