Major Layoffs Coming to MySpace?

As predicted, weeks after one of MySpace’s (News - Alert) co-founders stepped down “by mutual agreement,” rumors are now emerging that large-scale layoffs are coming to the social networking site.

 

According to Jason Kincaid of TechCrunch, a “Weblog” that profiles and reviews new Internet products and companies, the layoffs could affect up to 500 workers. Citing anonymous sources, Kincaid says that the number of employees affected will be “massive.”

 

The move comes as cost cuts force Fox Interactive Media – which oversees the business operations of media giant News Corporation, MySpace’s owner – to abandon a plan to move into expensive new offices in the Los Angeles area.

 

According to Reuters (News - Alert), the head of News Corp.’s digital business, Jon Miller, who oversees FIM, told workers in a memo on Friday that the company is streamlining expenses.

 

“Since coming on board, it’s no secret that I have asked each of the executive teams within FIM to conduct a comprehensive strategic review of their businesses to ensure that we are operating as efficiently and effectively as possible,” Miller wrote in his memo. “These reviews have included a very close look at our costs and a full examination of our resource allocation – an important exercise that will help us determine whether our resources are aligned properly with our business priorities. This process is still ongoing and we will be communicating the details of the reviews as the results become available.”

 

In many ways, layoffs at MySpace aren’t a total surprise.

 

As TMCnet reported, News Corp (News - Alert). in April announced that one of the social networking site’s co-founders – Chief Executive Officer Chris DeWolfe – would be leaving the company.

 

About a year ago, Facebook (News - Alert) eclipsed MySpace in overall users. Facebook has more than 200 million to MySpace’s approximately 130 million. MySpace remains the largest social network in the United States, but membership is slowing and even falling. According to comScore (News - Alert) Inc, U.S. membership fell 4 percent year-over-year in April, to 70 million.

 

Those are troubling numbers for Rupert Murdoch, especially considering this one: The media behemoth’s News Corp. paid $580 million nearly four years ago for the site.

 

Also troubling is evidence that Facebook is on the rise, with its “Facebook Connect” development tool for the Apple iPhone, integration with Netflix and rumored native integration with handsets from Nokia, among other developments.

 

We heard recently from the Los Angeles bureau chief of BusinessWeek that a major cultural shift is coming to MySpace, signaled by the sudden departure of DeWolfe.

 

Ronald Grover reports that News Corp. will throw money and personnel behind efforts to expand MySpace’s music site and efforts in video gaming, as well as “to add more originally produced TV shows to the small but growing number that MySpaceTV produces.”

 

“And there will be plenty of joint promotions between MySpace and other News Corp. properties – say, a promotional spot on the Fox network’s American Idol or at halftime of an NFL pro game,” Grover reports.

 

As Kincaid notes, it isn’t clear how many of MySpace’s approximately 1,600 workers will be let go.

 

“Last summer MySpace let go of 5 percent of its staff, and as many as 45 employees were laid off last month,” the TechCrunch writer says. “These cuts go far deeper. We’ve heard that the company’s legal team is hammering out the paperwork that will need to be submitted to the state of California under the WARN act, which requires large companies to give advance notice of any major layoffs.”

 

Stay tuned to TMCnet for developments.