News Corp. shuns Fox Interactive in ROO deal

The Wall Street Journal reported (behind paywall) this morning that News Corp would announce a $12 million investment in online video startup ROO. However, unlike other investments and acquisitions in Internet startups, News Corp. subsidiary Fox Interactive wasn’t involved in the deal. Fox Interactive owns Myspace and has made investments in startups such as SimplyHired. They are the Internet arm of News Corp.

From what we are hearing, not only was Fox Interactive not involved in the deal, they didn’t even know about it. The rumor is that Fox Interactive execs only heard about the investment when they read the WSJ article this morning. And they weren’t happy. An insider told us that they were incredulous News Corp. would do an Internet deal without Fox Interactive’s involvement (or at least knowledge), and said he couldn’t believe News Corp. invested in that “fucking disaster.”

Adding to the embarrassment – Fox Interactive has been having separate conversations with ROO competitor Brightcove, which recently raised nearly $60 million in a round of financing that valued them at a rumored $220 million. Fox Interactive was reportedly in conversations to acquire Brightcove just prior to the closing of that financing, for $250 – $300 million.

This is clearly a case of the right hand not knowing what the left hand was doing.

Fox Interactive has been weakened since the departure of former head Ross Levinsohn, who was replaced by an executive with little Internet experience. The fact that News Corp. made a significant investment in an Internet startup without consulting Fox Interactive suggests News Corp. is no longer looking at their Interactive subsidiary to guide them with online strategy.

Update: I got an email from another insider that suggests the initial Wall Street Journal report was incorrect and that News Corp. received warrants to acquire stock in ROO based on certain revenue/performance thresholds. Despite reports coming from Fox Interactive PR that they did know about this deal, we’re sticking with our initial assessment that this was a complete surprise to them.