It's raining pink slips in the online media world, creating new doubts as to whether content is really king on the Internet.
On Monday, New York Times Digital laid off 69 workers -- 17 percent of its staff -- citing an unexpected drop in advertising revenue. Four days earlier, News Corp announced that it was scaling back its Internet division, News Digital Media, eliminating nearly half of the 450 jobs at Foxnews.com, Foxsports.com, and Fox.com.
But the shakeout isn't limited to old media companies trying to wing it on the Web.
"New economy" publications such as Red Herring, The Industry Standard, Salon and Fast Company have also slimmed down in recent months.
Earlier this week, Standard Media International laid off 36 people from business functions within its online unit, TheStandard.com.
Industry watchers are saying that these cuts are just the first cuts in what they see as a large-scale retrenchment in online media.
The Wall Street Journal reported Thursday that CNN News Group will announce massive layoffs, eliminating between 500 and 1,000 positions at its Internet and TV operations as early as next week. According to the paper, the reorganization is aimed at consolidating CNN's news-gathering efforts across its network of TV and online channels, which includes CNN, CNNfn and a joint-venture with Sports Illustrated, CNNSI.
The layoffs could be seen as inevitable fallout from the imminent merger between CNN's parent-company Time Warner and AOL. But analysts say that it's also the result of increasing competition from rivals Fox News and MSNBC.
Consolidation is a possible trend of the future. Late last year rumors swirled about a possible merger between Business 2.0 and The Industry Standard. Although both publications deny any such thing, the rumors underscore a feeling that consolidation within the industry will occur in the near future.
Media companies may decide to share the cost of producing content, Dan O'Brien, an analyst at Forrester Research, said.
Not only are experts questioning what role the media will play on the Internet in the future, but whether such an enterprise will ever be profitable on its own.
"Online content has moved out of the experiment stage. Now it's time to get back to business fundamentals," said University of California, Berkeley journalism professor Paul Grabowicz.
Recognizing that, online media companies are slashing budgets and cutting staff.
Last year at this time, Internet-related media were bulging with dot-com advertising, challenging publishers to balance ad content with editorial content and leading many to bulk up their staffs. But this year, with dot-coms slumping and ad sales dwindling, both old and new media companies are tightening their belts and looking for new sources of revenue.
In the early days of the Internet, old media titans rushed to establish an online presence as a defensive measure.
"There was this sense that an Amazon.com-type company would emerge in their space and steal all their business, so they poured money into their online operations out of fear," Grabowicz said. "Now that the dot-com threat has dissipated to a certain extent, I think they're cutting back on their online investments."
Initially, traditional media companies used the Web primarily as a channel to market their print or broadcast properties. There was always the intention of making money from their online ventures, but it wasn't until recently that showing a profit in the old-economy sense became a priority.
"The idea was to grab as much market space as you could, get funding from VCs, go IPO, and cash out. The whole market was so twisted," says Grabowicz. "The objective wasn't to make a profit in your business, but by selling it to the public or to another company. That's why there wasn't a serious business model attached to these companies. It was part of the whole Gold Rush mentality."
Last October, facing low investor interest, The New York Times Company canceled its plans to spin off its Internet arm to the public. Just this week, the company sold nearly all of its stake in TheStreet.com.
"During the early days of Internet growth, there was a fear that television and Web programming would rival each other," said John Richmond, president of News Digital Media, in the press release announcing the layoffs at the Fox websites.
"On the contrary, we have seen a strong symbiotic relationship develop between Fox's online and broadcast platforms, and the time is right to capitalize on that relationship by streamlining our sports, news and entertainment programming."
Companies are looking beyond the good ol' banner ad for new ways of making their websites pay, such as corporate sponsorships, subscription-only content and pay-to-play broadband features. News Corp., for example, plans to start charging users for online video content.
"In the offline world, media revenues come from paid subscriptions, inserts, classifieds and displays," Forrester's O'Brien said. "But the Web has a voracious appetite for content and you just can't feed that with what worked in the old model. Online media companies need to rethink how to fund and staff these online ventures in a new way."
