The Four Horsemen
Some of you might recall that after eUniverse - renamed Intermix - launched MySpace, it got into some problems with the SEC and its board forced CEO Brad Greenspan to resign. Greenspan remained a big shareholder, but the Board brought in Richard Rosenblatt to run the company. Rosenblatt is the executive (with an impressive track record in social media dating back to the late 1990s) who ended up selling Intermix to News Corp. for $580M. Rosenblatt orchestrated the deal with his counterpart over at News Corp, Ross Levinsohn, who was responsible for building up News Corp.’s digital strategy for Chairman Rupert Murdoch.
The Crown Jewel: MySpace
While the MySpace founders Chris DeWolfe and Tom Anderson made about $5M in the sale, Greenspan made about $40M-$50M while its VCs Redpoint and Vantage Point Partners walked away with the bulk (shocking, I know).
Let The Litigation Begin
After the sale, Greenspan lost it an proceeded to sue everyone in sight, arguing that the Intermix Board conspired with News Corp. to sell the company on the cheap. News Corp.’s former CEO of Fox Interactive Media Ross Levinsohn even went as far as telling Greenspan to go get a life. I believe the actual words were “he’s a loser”.
Value is in the Eye of the Beholder
Greenspan felt somewhat vindicated (not really, but you know what I mean) when RBC analyst Jordan Rohan came out and pegged MySpace’s value at $15B. Obviously that did not change much, in some ways, but then when News Corp. Chairman Rupert Murdoch himself tried to swap MySpace for 25% of Yahoo! (implying that MySpace was worth some $10B), Greenspan felt even more vindicated in his claim. Maybe he wasn’t winning in the court of law, but at least in the court of public opinion some felt that his case was not meritless, either (all cases are frivolous, if you ask me, because if you actually have a case you should be able debate it in a civil fashion, but who am I to tell all of these distinguishes gentlemen how to act).
Battle Spills Over Onto Print
Things escalated quite a bit when Greenspan took the offensive to Murdoch by offering Dow Jones shareholders a competing offer to what Mr. Murdoch was offering ($5B) to acquire the publisher of Barron’s, Wall Street Journal, etc. Ultimately, News Corp.’s offer was too rich and Greenspan had to back down.
Adding Velocity to the Fight
Levinsohn himself left News Corp. to pursue greener pastures. He partnered with ousted AOL CEO Jon Miller and merged their operations with VC ComVentures. Mind you, how that took place is a recipe for its own soap opera… Regardless, undeterred, Velocity has made a series of investments in a wide array of digital media firms. They are also getting competition from other VCs, strategic investors and talent agencies who are starting to get it: the brass ring in video will be professional content and not one more platform or ad network… I covered this in 2008: Rise of Digital Media Content Funds. In fact, I’d argue that it is not a coincidence that VCs herd mentality caused this rise: once VCs saw what former media executives were lining up to invest in, they got in the back of the line themselves and started to cut some checks. It also helps that many of their previous investments were bombing… which takes us to:
Video is the Killer App
While Greenspan was voicing his objections to the MySpace deal, he was also building a video empire. It’s worth noting that Greenspan’s first stab at online video came via Vidilife.
Content is King
I first read about Vidilife in the December 25, 2005 issue of Business Week. As a side note, I had literally just been pushed out of IGN - the other company that Mr. Levinsohn also got Rupert Murdoch to buy, at $650M, earlier in 2005. I was sitting in my “war room” thinking of what to do next after my run as vice-president of ad sales had come to an end.
Throughout 2005, as I integrated my old company into IGN (from May to September) and then into News Corp. (from September to December), I had built a search engine, developed a community for contest seekers… I was eager to get a blog network going… but I could not help but realize that the future would belong to video.
Never one to really buy into the social media myth, I did not really understand MySpace’s appeal, let alone’s Vidilife’s. Regardless, before long, YouTube - which had been registered as a URL in May 2005 and well on its way to become a cultural phenomenon - was capturing everyone’s attention: namely investors and big media firms who saw it with both envy and fear.
From Vidilife, Greenspan has pushed the envelope, launching LiveVideo.com and aggregating a number of other properties under the Live Universe moniker.
Buy Low…
How he’s done it has been interesting, insofar he’s using his resources to scoop up distressed assets. Today I learned that he bought Pageflakes, a company that was allegedly running out of money.
Pageflakes had raised $3.1M from a few VCs, but with strong competition from French-based Netvibes and competing offers from Google, Yahoo! et al., I am not sure how big this market is (with regards to upside).
This acquisition came on the heels of that of Revver, another distressed asset (that in a crazy way I myself considered making a run for, but then wised up when I realized I should stick to my plan and focus on professional content and not the promise of merging Revver’s network into WatchMojo.com’s content).
The Mother of All Roll Ups?
Not to be outdone, Rosenblatt has not been sitting idle sipping on martinis. Rosenblatt, of course, has raised nearly $400M (yes, four hundred million dollars) and rolling up assets of his own: eHow, ExpertVillage, etc. in his company Demand Media.
What Does the Future Hold?
Just a few minutes ago Om Malik asked if we will see a Vulture 2.0 Fund?
I do not know any of these men personally, but I’ve worked with all in one capacity or another, directly or indirectly. I do wonder how much of their decisions are based on a rationale of doing what they believe is best to create value; and how much is done to one-up one another.
It will be very, very interesting to see what the end game will be between these men who are clearly making decisions both rationally and emotionally.
Greenspan and Levinsohn can’t be all that chummy… I presume Levinsohn and Rosenblatt are cordial.
Greenspan and Murdoch probably can’t stand one another; and given some of the rumors surrounding Levinsohn’s departure from News Corp., I do wonder how much friction a conversation between Messers Levinsohn and Murdoch would be, for that matter.
Why is this important?
Well, both Greenspan and Rosenblatt are taking a roll-up strategy while another, Levinsohn, is making small investments (not sure if a $15M bet is small, but I digress) across many companies.
Mind you: Greenspan is taking a low-risk approach whereas Rosenblatt is financed galore in a more risky, high-octane fashion.
The most ironic part of it all, frankly, is that the one figure who looms stall in all of this is is none other than Rupert Murdoch, whose News Corp. empire is a natural acquirer of many of these assets: LiveUniverse, Velocity portfolio companies, Demand Media, etc.
2008 is really sizing up to be an eventful year that will make 2005 look quite tame…
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