Less than 10 years ago, a rush to buy online magazines, with major media companies bolstering their existing businesses by snapping up websites devoted to movie news websites, gaming, general entertainment and news aggregating, was continuing strong — even as cheaper content like blogs were gaining popularity.
Now, as advertising revenue growth slows, these web properties have become uncertain commodities.
According to writer Peter Kafka, News Corp. (NASDAQ:NWSA) is preparing to cut loose IGN Media, the network of entertainment websites and services centered around video game and culture website IGN.com. The network was one of the rare web properties started in the 1990s that survived the dot-com crash. Another survivor of that era, the Hearst-owned UGO.com, is likely to bought by IGN before it gets cut from News Corp.
It’s hard not to interpret that strategy as removing a cancer rather than spinning off a major new business. While hardly the bum investment that Myspace turned out to be for News Corp., IGN has proven to also be a missed opportunity for Rupert Murdoch’s media empire. Purchased for $650 million in 2005, IGN had everything a large media company wanted — a healthy readership that translated into healthy ad sales and a strong stable of then-new content for the web, including blogs and video.
The same thinking stood behind Hearst’s $150 million purchase of UGO in 2007, though even then web content was beginning to change, with many professionally edited websites turning to content written by a site’s readers rather than paid writers and editors.
Times have changed significantly. Display advertising and search advertising revenue has recovered since major dips in 2009, but the audience for websites like IGN and UGO are migrating away from the Web itself to web-connected apps on handheld devices like Apple’s (NASDAQ:AAPL) iPhone. News Corp. has famously invested in developing new properties for the changing audience, like the iPad newspaper The Daily. It’s no wonder they are anxious to slough off the old to make way for the new, and its telling that Hearst is willing to make nice with its rival to surrender some of its own baggage.
But it’s not time to totally discount the value of such sites. Time Warner’s (NYSE:TWX) announcement on Wednesday that is has acquired Flixster and its popular related website Rotten Tomatoes shows that large companies still see both value and potential in web content.
Rotten Tomatoes is a chiefly a movie reviews aggregator, an all-in-one outlet for readers to see professional movie reviews as well as audience-written reviews all in one place, alongside other film related entertainment. It is less magazine-like than IGN or UGO, but similar in its audience and appeal.
In its press release, Time Warner says the acquisition will be used to “launch a number of initiatives designed to grow digital content ownership” meaning the company believes that Flixster and Rotten Tomatoes, which will remain independent, have an opportunity for growth — even as the audience moves away from web browsers.
According to Alexa.com, Rotten Tomatoes actually gets fewer monthly visitors than IGN. Maybe News Corp. and Hearst are jumping the gun in getting rid of properties that could be recycled rather than thrown out.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at�@ajohnagnello�and�become a fan of�InvestorPlace on Facebook.
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