"We are considering a number of strategic options for the business," a News Corp. spokeswoman told the Wall Street Journal.
According to the newspaper, which is also owned by News Corp, a spinoff is thought to be the most likely outcome.
Meanwhile, a source close to MySpace told Reuters a spinoff was likely to entail someone from the venture capital or the private equity community investing in MySpace, thereby altering the current ownership structure.
The news comes just a day after MySpace announced plans to lay-off 500 employees, or about 47 per cent of its global staff, as part of a restructuring by the once-leading, now struggling social networking site.
The reorganisation includes striking up partnerships in the UK, Germany and Australia for managing advertising sales and content, MySpace said.
News Corp purchased MySpace for $580m in mid-2005, when the site ruled the emerging social networking market and had great potential to be a gold mine of advertising revenue.
See also: MySpace announces 'Mashup' with Facebook