News Corp pays $580m to expand on the internet

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Rupert Murdoch unveiled the first step yesterday in his keenly awaited strategy to boost the internet content of his media empire, News Corporation, saying it would acquire a Los Angeles-based company offering online services ranging from video downloads to classified listings.

News Corporation will pay $580m (£330m) for Intermix Media, which hit the headlines this year when it agreed to pay $7.9m to settle charges brought by Eliot Spitzer, New York's attorney general, that it was using "spyware" technology, which delivers pop-up ads and directs customers to certain websites. Intermix has now stopped using the controversial programmes.

Intermix, formed six years ago, controls websites including MySpace.com, one of the fastest-growing internet sites, aimed at teenagers and people in their twenties. It allows them to talk online and download music.

News Corp said the deal would almost double the number of people who look at its websites in the US to more than 45 million a month. It announced on Friday it was creating a separate internet division, Fox Interactive Media, to deliver output from its Fox TV channel online. The Intermix deal comes after Mr Murdoch warned a group of US newspaper editors in a speech in April they had been "remarkably complacent" about the negative impact of internet use on newspaper circulation and corporate advertising.

"I didn't do as much as I should have after the excitement of the late 1990s," Mr Murdoch said. "I suspect many of you in this room did the same, quietly hoping this thing called the digital revolution would just limp along. Well it hasn't, it won't, and it's a fast-developing reality that we should grab."

Mr Murdoch owns The Sun and The Times in the UK and the New York Post and Fox in the US. He has called the current strategy of most newspapers, which is to regurgitate many of the same articles from print editions on their websites, "bland".

He believes creating internet portals, bringing together a wide range of services, will capture younger customers who are used to gathering news and other information from the television and internet.

Mr Murdoch's enthusiasm for online expansion comes despite the fact that BSkyB, the UK company he controls, lost millions on a string of hi-tech investments made at the height of the stock market's craze for internet companies whose values later imploded.

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