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Daily Reaction: IGN up for Sale, PSLS Offers 2 Cents (And a Giveaway)

October 16, 2012 Written by Dan Oravasaari

In light of today’s news that the popular gaming media giant IGN is being sold off, the Daily Reaction crew weighs in to see what the future may hold. As the reality is that the backbone of any industry, even gaming and its media, is still a business, the ramifications that may be felt by this decision might be seen for years to come.

Dan: While we have poked fun at IGN a few times in the past, the reality behind this situation is that this could put people out of work, and be a problem for employees and their families. When a parent company sells off the company that you work at, the future can be extremely uncertain. Much like when News Corp purchased IGN back in 2005 for $650 Million, and they eventually folded the the later acquired UGO (1up) into a single entity. This placed a great deal of talented people out of jobs, and also reduced the level of competition across the field. Which is something that becomes a problem for consumers, gamers, and the industry as a whole.

The most worrying aspect that falls on this situation is the incredibly diminished value that News Corp is seeking for selling of IGN. As they originally purchased the IGN group (including a number of sites) for $650million, they are now selling the whole thing for only $100 million. Which means either IGN and its sister sites have drastically dropped in value, or News Corp paid substantially too much for the sites. Either way, whomever decides to pick up the lot will be getting a better deal than it was originally picked up for.

Seb: News Corp are simply terrible at understanding and properly handling online properties. If you look at the original press release for the 2005 buyout of IGN, you’ll rather tragically see them boasting about MySpace… you know, the site they bought for $580 million, ran at a loss for a few years and then sold for $35 million.

But News Corp’s share price aside, what does this mean for the games media? Love them or hate them, IGN is the industry’s biggest name, it’s what represents games media to those new to gaming – essentially, it’s like Call of Duty. And just like Call of Duty has spawned a bunch of ‘me too’ competitors, so has IGN, and whatever direction they take will likely cause a bunch of smaller sites to follow suit.

Print journalism is dying, and specialist games publishers like Future are increasingly turning to online as they watch their core business dry up and begin to crumble. But there’s a problem – from a financial perspective, the numbers don’t add up. For example, in the UK in 2009, the Official PlayStation Magazine had a yearly circulation of 47,033 (that is even lower now), which is far, far lower than what we get at PSLS in a month. And yet, they bring in much more money than we do, are able to pay more people than we do and even buy exclusives. Why? Because people pay as much as £5.99 upfront, and then also read a bunch of ads next to the articles. To have the same revenue on a website, you need far more readers because they’re just seeing ads which pay virtually nothing per reader.

Problem is, there are a finite number of readers out there, but there are far more games websites than there ever were physical publications. A startup like PSLS never could have raised the capital to go into print, yet now we’ve found a niche market (sadly not worth $650 million) where we can make ends meet most months.

Just like the rest of the entire media market, there’s a turmoil as Fleet Street tries to come to terms with the internet, tries out paywalls or tries to dominate the market and win by sheer numbers. IGN tried to win by sheer numbers – 28 million monthly readers at the time of purchase – and it clearly doesn’t seem to have worked in their favor.

Dan: Exactly, the one thing that strikes me about this whole situation really is the numbers. The valuation for IGN is absurd, as server and staffing costs alone are a never ending costs for an online based company, and for someone to gain profit off of a $650m or even a $100m deal seems ludicrous. While News Corp does own Fox, the idea that they purchased one of the largest online games media publications in the world, while owning one of the largest media brands in the brands in the world and could not turn a profit could be a problem for the industry as a whole. So if you enjoy reading sites like PlayStation LifeStyle or IGN, you need to make sure that you say so, as the online industry behind the scenes really is a fragile thing where millions of dollars can be shifted in an instant.

While it is true that the number of potential readers is a finite number that is only a portion of the gamer population, that number should hopefully be growing as new markets convert more of the casual market. The only issue with this is that, while there may be more people gaming, the chance they are caring to read about upcoming releases, or events occurring in the industry are incredibly low. So one thing that is becoming a growing part of games media, as a tool to bring in this budding gamer, is covering related content. While the casual market might not care for news, or reviews, the ability for them to find out about gaming culture, attire, or even other casual gamers is something that could be useful. Sadly, the ability to keep staff that is able to generate such obscure and off topic content is highly expensive, which is something that IGN has actually been able to do – and hopefully they will be able to continue giving a well rounded site for gamers of all types.

Seb: Speaking of numbers, it’s pretty interesting to see that IGN only fell from 28m to 26.4m readers in the time it took for the value to fall from $650m to $100m. So that really begs the question, how did it all go wrong? Did they really that poorly misjudge how much ads make?

Either way, I’m hoping that a new owner brings a new direction for IGN, and so a new direction for all the sites that base their style off of the red giant. I’ve talked in length before about the importance of proper sourcing and how we all need to do it, so I won’t bore you by repeating myself. But everyone needs to make a greater drive for investigative journalism, for aggressive interviews, for sites that support the consumer and not the publisher, for sites that help out independent developers gain attention.

I hope that a new IGN could help lead that charge, and make the industry a better place for all of us.

Competition:

As PSLS loves to give you everything from awesome content to sexy prizes, we have a special set of 5 PS+ 30 day codes and access to the PlayStation All Stars Battle Royale Beta to give away. To win all you have to do is email DailyReaction@PlayStationLifeStyle.net a joke you would like to hear read on our Bad Gamers Podcast. You must have a US PSN account.

Do you read IGN? Do you think that this change of ownership will have a significant effect on the site, or even the industry? Do you think that Seb and Dan should do a Kickstarter to raise $100 million to buy IGN? Let us know in the comments or on Twitter.