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NBC takes stake in teen site DEN

The TV network invests $7 million in Digital Entertainment Network, a site aimed at teens and 20-somethings; separately, DEN says it has laid off an undisclosed number of employees.

NBC today invested $7 million in Digital Entertainment Network (DEN), an Internet entertainment site aimed at teens and 20-somethings, in a move that will broaden the TV network's online content.

Separately, DEN executives said that the company, which has approximately 200 employees, has laid off an undisclosed number of workers within the past two weeks.

Terms of today's agreement call for NBC to make a $2 million minority cash investment in DEN and to give the start-up $5 million in advertisements on NBC stations.

The stake follows similar investments announced last month by semiconductor manufacturer Intel and Enron, an energy powerhouse and communications company.

The investment--signed in early February as part of a $24 million Series D round of funding but not announced until today--will provide additional financial backing for DEN while it contemplates plans for an initial public stock offering. DEN postponed its IPO plans about the same time as the investments, according to executives.

Executives said the decision to delay the IPO was the result of the company's business changes, which includes the appointment of some new top managers in addition to the layoffs.

"The availability of economically outsourced content is now in play. That's something that wasn't an option when we first started," DEN chief executive Greg Carpenter said in explaining the cutbacks.

NBC and DEN said they would work together to promote and market their services while co-producing and distributing digital media content. The deal gives NBC, as well as its NBC Internet unit, access to Web content that is targeted at the coveted 14- to 24-year-old generation. DEN produces TV-like programming and digital music.

CNET Networks, publisher of News.com, owns a stake in NBCi.

For DEN's part, NBC's stake lends additional credibility to the company and will allow DEN to market itself on network television--seemingly a requirement for establishing a recognizable Internet brand after a deluge of costly Super Bowl ads by dot-coms.

"The on-air promotion will certainly help us try to drive traffic from NBC shows targeted at teens," Carpenter said.

Teen-oriented sites have a huge market potential, according to analysts, as many demographers believe today's teen-agers, often referred to as "Generation Y," represent a powerful, financially secure and Net-savvy market. Numerous Internet companies are targeting teens in hopes of establishing lifetime loyalties early on.