Wednesday, July 13, 2011

Rupert Murdoch and Wendi Deng's MySpace China Venture

Murdoch’s wife paid $300,000 for ill-fated role

Rupert Murdoch is getting a tough time in the global press right now, particularly in the United Kingdom. A new allegation shows he paid his wife US$300,000 during her time as chief strategist for MySpace China during its ill-fated stint in the country under the management of News Corp.

The information has emerged following an investor lawsuit filed in the US state of Delaware accusing Murdoch of hurting News Corp’s value by using its resources to “enrich himself and his family members at the Company’s and its public shareholders’ expense.”

More details come from IT World:

“Not only did Murdoch waste $580 million in 2005 by buying Myspace, which his company promptly drove into oblivion, he paid his wife, Wendi Deng, nearly $300,000 to provide “strategic advice” to Myspace China over a three-year period. (This comes from News Corp.’s 2010 annual report.)

“It appears that Deng’s main credential for the job is that she’s from China. Unless Rupert figured her stint as a junior executive at Hong Kong’s Star TV – before she married Murdoch way back in 1999, when no one had ever heard of Facebook, Twitter or LinkedIn, never mind Myspace – qualified her to advise a social networking site.

“And look at how Rupert’s gut instinct paid off! Two-thirds of the staff were laid off in January, and the MySpace China CEO resigned.

“This came just a couple of years after Deng was supposed to come in and save MySpace China following the September 2008 resignation of the previous chief executive.

“And yet those malcontent investors fail to perceive Deng’s strategic brilliance. She was worth twice what News Corp. paid her, even as MySpace was worth about 6 percent of what Murdoch paid for it in 2005 when it finally was unloaded earlier this month for $35 million.”

I very much doubt Mark Zuckerberg is lining up a similar strategy that would see his Chinese girlfriend, Priscilla Chan, take charge in China but as IT World – and the News Corp 2010 report – clearly show Murdoch is used to keeping things in the family.

Deng, who became chief strategist, started out on the MySpace China board, but even back then in 2007 the Chinese magazine Caijing foretold MySpace’s failure, concluding that “It is not clear why MySpace China will be successful. They don’t seem to have anything special to offer, and they are late to join an already crowded field…” – although others, like The Asia Mag, speculated that MySpace and Deng “could change the landscape of the online world in Asia.”

Alongside a struggle in the market there were rumors of boardroom issues, and even a suggestion that Deng had an affair with MySpace founder Chris DeWolfe.

Ultimately, it remains unclear just how much of the failure can be attributed to Deng and her lack of experience, or whether Murdoch was simply “enriching his family” by putting Deng into the position.

Though Deng does hold a masters degree from Yale, might MySpace China have performed better under more experienced, specialist hands? Or was the writing on the wall in China, as the site had declined globally?

Jon Russell blogs for Asian Correspondent, with which Asia Sentinel has a content-sharing agreement.

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