For News Corp. (NWS), MySpace is the mistake that keeps on costing. It's bad enough that Murdoch's empire paid $500 million for the social networking platform shortly before Facebook knocked it from the premier spot in the social media beauty pageant, but now we also know that News Corp. has committed $350 million to office space for MySpace that will never be used.
News Corp is shelling out more than $1 million a month for 420,000 square feet in Playa Vista, near Los Angeles International Airport. The deal was signed in August 2008 by Peter Levinsohn, former president of the Fox Interactive Media Unit. At the time, he issued a chest-puffing memo claiming it was "the single biggest real-estate transaction in Los Angeles in the last 25 years." Fortunately, he didn't mix the word "genius" in there at all.
Because of this monstrous deal, News Corp is on the hook for 12 years for what is ultimately expected to cost $350 million – not that much less than what the company has paid for MySpace itself!
The lease was supposed to start in June 2009, but the plans were abandoned after a management change. Efforts to sublease the space haven't worked out. Along the way, 40% of the staff at MySpace was cut.
And it gets worse.
In January 2010 (and again in June), the rent payments will increase to nearly $2 million a month.
This is just what MySpace needed after earning $100 million less than it expected from a search deal with Google (GOOG). MySpace didn't reach its traffic targets.
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