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Monday, September 26, 2005 - Page updated at 12:00 AM

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Q&A: Scout Media to stay after acquisition

Seattle Times technology reporter

Seattle-based Scout Media has been called up to the major leagues.

The company, which owns a network of sports-related Web sites and magazines, has been acquired by News Corp. in a deal that closed Sept. 16; its terms were not made public.

The acquisition is part of a recent buying spree at News Corp. The New York-based media conglomerate run by Rupert Murdoch agreed in July to buy Intermix Media, the parent of popular Web site MySpace.com, for $580 million in cash. Earlier this month, News Corp. announced it was buying IGN Entertainment, a video game-focused media company, for $650 million in cash.

All three acquisitions are now part of News Corp.'s newly formed Fox Interactive Media division. The division's president, Ross Levinsohn, was in Seattle last week to meet with Scout Media and its chief executive, Jim Heckman. During his visit, he answered some questions about Scout Media and News Corp.'s plans.

Q: So are you visiting Seattle just to get to know everyone at Scout?

A: We know some of the folks. We've been in a business relationship with Scout for a couple of years. But it's really to start laying out the vision for the future and how we integrate and how we take this from where they are today to the next phase of the business.

Q: What are your thoughts along those lines?

A: We're a broad media company, and what Jim and his team have done on a shoestring is pretty amazing. When you just sort of look at the low-hanging fruit of integration into 20 regional sports television networks, Fox College Sports network, Fox Soccer Channel, Speed [motor sports channel] and Fox broadcasting with NASCAR, NFL, Major League Baseball, you start to think about the direct ways to talk to 100 million, 200 million consumers that might be interested in some of the content that Jim and his team have developed.

We also think about the internationalization opportunity. The model that Jim has created certainly would play in Europe for soccer, let's say, or Australia for rugby. We now have resources and marketing and more and more assets to throw at this. I think the sky's the limit for Scout.

Q: What are your plans for Scout? Will it stay here?

A: It's going to stay here. We're going to try to integrate as best we can where it makes sense. We certainly are open to folks coming to Los Angeles but I think there's something really valuable about having an office in a technology hotbed like Seattle. In fact, I would hope that we can create a little bit of an outpost here for developers and engineers and creative people who feel like it might be fun to be attached to a big media company, yet sit here on Puget Sound with a beautiful view and some resources and just develop.

News Corp. is a creative company at its core. We produce things. We publish things. We're also a distribution company. Somehow merging the worlds of technology and traditional media distribution hopefully can create an interesting environment for folks who want to come here. That's not the obvious reason you buy Scout, but having a leg up here in Seattle is pretty important for us.

Q: Do you think sports coverage on the Web is as good as it can be?

A: The coverage of sports today is at an all-time high, for sure. You're approaching a saturation level on television. There are 40 channels or more devoted to sports. I was reading somewhere about the martial arts network that's going to launch. Maybe when I get done with this I'm going to start the putt-putt golf channel.

You've got most things covered. The beauty of the Web, though, is that there's not a saturation because there is no limit to channel capacity. Fox Sports and ESPN and CBS and others are doing a pretty good job at the national level. One of the most attractive things about Scout is that it's doing it on the local level.

The differentiator of our sports properties, aside from the national broadcast network that we have, is the regional sports business. Our company views this as a natural extension of that. When you look at the numbers we do on a regional sports basis, Fox Sports Northwest up here blows away the ratings that ESPN does. More people are interested in watching a Huskies game than are interested in watching the national, say, Texas-Oklahoma game in this market. So you have an affinity to those fans and what Jim's done clearly is tap into that affinity. It's not hard to think about how they intersect.

Q: How integrated are the different News Corp. properties and could they be more so?

A: The model that we've created at FoxSports.com with our television folks is completely integrated. In some cases, on a national sales buy we buy across television broadcasts. We talk about what are the ways that we should be integrating. Television is providing FoxSports.com and now Scout with video interviews, breaking news, etc. In many cases, we're actually feeding up to the news bureaus around the country info and data that we get. So it really is a partnership.

Q: What's an area where News Corp. could see more integration?

A: The most obvious way is local ad sales. The local ad community online is just starting to take off. It's a bit of technology management in terms of insertions, but we have a massive local television sales force that in many markets has a duopoly with television stations.We have four television properties in the Los Angeles area and we have a sales force at Fox television stations that sells those. They work with the national sales force for national, they have their own local sales team and we have sales people there.

So the low-hanging fruit is the national sale because it's easier to walk into Coke and Microsoft and say, "Buy a national ad." The real win is can you go to Al's Chevy down the street and specifically insert targeted ads for the market they're looking for.If Chevy's pushing their new Corvette and they know they want men 35-plus, and we're able to look at our businesses, television and online, and say we're able to deliver in that market only 242,000 potential buyers — and when we start looking at information we're given because someone registered on Scout or MySpace or IGN and said "my likes are Chevy cars or vintage Corvettes" — the CPM [cost per thousand impressions] for that sale will be 10 times what just a national spot buy would be.

What I just laid out is a hugely complex equation, but the golden apple that's sitting out there.

Q: Explain the MySpace acquisition.

A: When you see a site that's probably the fastest-growing site in the history of the Internet, you sort of wonder what's going on. It was an opportunistic thing for us. When we started putting the strategy together, we said, "Let's take a look at what we have." In 30-year-old plus, we're pretty darn good. We've got a television network, we've got cable networks all skewing north of 30 years old.

Even our online properties, 25 to 54 [years old] is kind of our sweet spot. Really the future isn't about 30-plus, it's about 12-plus. Go watch a 12-year-old or a 15-year-old or an 18-year-old and just observe their media habits. Wow, it's a different world for them.

Part and parcel of our strategy was that we have to get younger. We certainly could build it, but it would take us three to five years and there's no guarantee. Or we could buy it. When we looked at the board, there were four or five companies that you say could be game changes or make a difference. MySpace, as fast as it was growing and the affinity and passion that it had with its community, was No. 1. IGN was No. 2.

We got young in a hurry by buying those two companies. Not only did we get young, but we got passionate communities. I wonder how many of the men on MySpace are interested in sports or entertainment. The crossover is just immense, and so this is our way in. It's a bet and it's a gamble. IGN is much more established business. It's been doing it for a while. And MySpace was one of those; you might be buying the next MTV. Or better.

Q: What did MySpace do to get that kind of audience so quickly?

A: The creators are as in tune with that generation as any folks that I've met. They provide the opportunity and the feature sets and the wherewithal for people to express themselves. And hey, I'm not hanging out in clubs anymore. And I don't spend enough time researching what youth do, other than knowing that they don't experience media the same way I do. So what they did was they were able to tap into that and they were able to create a buzz that only happens once in a while. They got to a point where it just feeds itself.

When we announced our deal they were averaging about 90,000 new registrants a day in July. They're up to about 120,000 new registered users a day. They're doing a billion ad impressions a day.

Q: It almost seems like buying these was the easy part. How do you take what you've bought and really make it a valuable asset across the company?

A: Therein lies the billion-dollar question. We're just starting on that path. We've acquired a lot of talent, a lot of audience, a lot of opportunity for advertisers and stitching that together in some cogent, meaningful way is going to be a task for us. But I think we have the workings of what it will be. The beauty of the Web is that it's always changing. I'm not sure that we've got anything else big lined up or that we may need anything else big. Or that we need to really be focused on building a portal. I don't think that's where the Web is going.

What I'm really focused on and when we started our thinking was, be really good in whatever category we're at. We are good in sports. Then you look at news and entertainment, and you say, we've got all these great assets, why aren't we doing better online?

We're doing great in traditional mediA: But it's not as simple as saying, let's just take those assets and put them online. It doesn't work that way. We not only needed to sort of instantly get better and bigger, but we needed talent. We couldn't possibly hire the talent that we've acquired. Our challenge is going to be how do we put it all together, but also how do we keep innovating, and can we actually innovate beyond what anybody else is doing today.

Q: I'm amazed at the speed with which News Corp. is moving. Is there a sense of urgency here?

A: I work for two incredibly passionate, aggressive executives in Rupert Murdoch and Peter Chernin. It's them. My team laid out a plan and I thought the plan was pretty aggressive given where we had come from. The first thing that Mr. Murdoch said to me was, "It may not be aggressive enough."

You get to learn from guys like that who have built an unbelievable company worldwide. When you're around incredibly bright, smart, forward-thinking people it just sort of rubs off. You can't help but learn through osmosis. They've set us off on a path and they've enabled this whole thing.

We've got a lot of guys and girls who are working 17 hours a day to go as fast as we're going. These are not easy deals we're doing.

Q: What is it about this year, this moment in time that has caused the company to put its foot on the gas?

A: The obvious answer is look at how much revenue the big guys are making on the Internet.

This is a media business. It's also a technology business. People spend less time getting their news from television, from newspapers, from periodicals. You just sit back and say, we've gotta do something here. And you start sketching your strategy around that. The answer is, I don't know why it was like a light switch turned on. But News Corp., I think, believes that it's never really too late to get in because you could always acquire.

But you look at the leaders and they're really starting to stretch the landscape a little bit. We need to find our point of differentiation.

Q: To what extent are Microsoft or Google technology companies or media companies?

A: I'm not sure that you can differentiate anymore. Google has said publicly that they're a technology company, but you know a lot of people get their news from Google News. I don't know the road map for Google but my guess is they're going to be in the distribution business and they're going to be in the wireless business and they're going to be in the news business. Whether they do it with editors or 20,000 more computers I'm not sure.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2005 The Seattle Times Company

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