News Corp. has concluded that the best strategy to succeed in providing online movie news and information is to get out of it.
The media conglomerate led by Rupert Murdoch on Monday sold Rotten Tomatoes, the movie review aggregation website, to fast-growing user-generated review site Flixster Inc.
News Corp. acquired Rotten Tomatoes as part of IGN Entertainment, which it bought in 2005 for $650 million.
Under the terms of the all-stock deal, News Corp. will get a minority equity stake in 4-year-old Flixster and a nonvoting seat on its board.
The companies hope the combined entity will be better able to compete against larger players such as Internet Movie Database (IMDb), Yahoo Movies and AOL's Moviefone.
"Both sides wanted to build a player that can be No. 1 in the category, and our feeling is that a strong independent company is the best way to do that," said Joe Greenstein, chief executive of Flixster.
By taking a stake in Flixster rather than cashing out, News Corp. could be in a position to benefit from its growth and potentially buy back the combined company in the future, said a person close to the transaction who asked for anonymity because details were supposed to be kept private.
Flixster reported having more than 20 million Web visitors and more than 5 million users on mobile devices in December, up a combined 44% from December 2008. Rotten Tomatoes reported more than 10 million visitors last month, up 20% from a year earlier.
The deal is the latest move by News Corp. to reshape its two biggest online properties, IGN and MySpace. The Fox Interactive Media division, which encompasses both properties, has consistently lost money in the last year and took a $403-million impairment charge last year.
Rotten Tomatoes draws a broader audience than IGN, which bought it in 2004.
"Our main media business is guys, and gamers in particular," said Roy Bahat, president of IGN. "Rotten Tomatoes is a dual-gender site, as is Flixster."
Flixster will combine its database of more than 2.3 billion user reviews with Rotten Tomatoes' review compilations, but the sites will maintain distinct online identities.
Rotten Tomatoes' 13 employees will move to Flixster as part of the deal, and no layoffs are planned, Greenstein said.