The dotcom entertainment universe continued to shrink last week, as CMGI started to pull the plug on its Webcasting venture, and Discovery.com scaled back its operations with drastic layoffs.
CMGI is selling or shutting down iCast and its 1stUp.com free Internet service, taking charges of up to $90 million on the two Web businesses for its fiscal first half ending Jan. 31, 2001. Discovery.com is dismissing 90 employees-more than 40% of its staff-and has halted plans to spin off the online operation.
And they are not alone. In a second round of cutbacks this year, online ad-sales outlet AdExchange is cutting back its staff by one-third, to 23 employees.
CMGI will "wind down" iCast operations as it seeks a buyer for the business, according to Chairman and CEO David Wetherell. "Our decision is based on the finances required to fund this nascent business on an extended timeline to profitability," he told analysts last week.
ICast satellite facilities in Los Angeles, New York City and San Francisco will be shut down, leaving a "core" staff at its Woburn, Mass., headquarters, according to a CMGI spokeswoman, who declined to comment on whether CMGI had any prospective takers for the troubled business.
The dizzying drop in CMGI's stock price this year-symptomatic of the market-says it all: a 90% loss in value, from $163.50 to about $13 a share late last week.
ICast is on the bleeding edge of a trend that has already claimed Webcasters Pseudo.com and Digital Entertainment Network in the entertainment category and Zatso and BroadcastAmerica.com in the news-streaming space this year. The year-to-date casualty list stands at 130 ex-Web companies, according to Internet research site Webmergers.com, which estimates that there have been 8,000 layoffs in the sector.
Discovery.com President and COO Michela English said the company is "refocusing" its strategy in the face of lower-than-expected advertising and e-commerce revenues.
English declined to disclose the losses on the Web operation for 2000 but indicated that the cable company will spend $60 million online next year. That will include a redesign of the site early next year, while the company focuses on broadband and interactive applications and emphasizes content related to health, travel and education.
Independent media analyst Gary Arlen considers iCast and Discovery.com to be victims of what he terms "premature groping" among Web wannabes to wish themselves a viable niche. "iCast has been in search of a market, and Discovery has been trying to exploit a market," he said. "But they're both confronting the same reality: There's not enough of an audience out there."