Myspace Mulls Significant Layoffs, With Potential Sale Looming

Myspace–the long-troubled social networking site turned social entertainment hub–is in the midst of planning that could soon result in significant layoffs of its staff, according to multiple sources familiar with the situation.

That number could be as much as 50 percent of the 1,100 employees at Myspace, largely based in the U.S., but also in international locations.

While the decision of what cuts to make to its employee base have not been made yet, nearly the entire Myspace staff was given the last week of December off from work to save money. Update: Myspace tells us via email the week off was an employee perk, not a cost-cutting measure.

Sources stressed that management was still working out the details of more drastic cost-cutting measures that owner News Corp. has been wanting from Myspace, as its revenues and traffic have declined.

The layoffs are also part of a larger rethink about the future of the Beverly Hills, Calif.-based company, which has had many difficulties in recent years, including several leadership upheavals and a talent drain, as well as stagnant growth.

Among the many options contemplated has been the sale of the Myspace unit, as has been widely reported. According to sources, Jack Kennedy, EVP of operations for News Corp. Digital Media, has been tapped to explore the sale of Myspace.

Until now, both large-scale cost-cutting and exploration of an acquisition were on hold as Myspace launched its redesign as an entertainment hub, which was rolled out about six weeks ago.

Myspace also recently started user account integration with former foe Facebook.

And the company also revamped its mobile offerings and signed a new search advertising deal with Google (at which time MediaMemo’s Peter Kafka predicted layoffs were around the corner).

But, according to many inside and outside the company, the redesign and strategy moves are not expected to result in a major turnaround of Myspace. Meanwhile, the piles of money the company once got from its Google relationship have also gotten much smaller. It’s not much of a surprise that News Corp. is moving to remedy the situation now.

In fact, during News Corp.’s earnings call in November, COO Chase Carey called attention to Myspace’s ever-weakening performance and said “current losses are not acceptable or sustainable.”

He added: “We judge in quarters, not in years.”

At this point, a sale would be the likeliest save for the media giant.

One juicy rumor that has been going around suggests Facebook game-maker Zynga as a potential acquirer of Myspace. While the two companies had discussed closer ties in the past–back when Zynga COO Owen Van Natta was still CEO of Myspace–those talks went nowhere.

Several sources said a private equity buyer for Myspace is now the likeliest outcome if the online property is sold.

Myspace declined to comment on layoffs or acquisition talks.

(Full disclosure: News Corp. also owns Dow Jones, which owns this site.)