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Creative Planet cuts staff despite funding

The online entertainment supplier lays off 70 employees, just a few weeks after it secured $30 million in funding.

Online entertainment supplier Creative Planet on Wednesday laid off 70 employees, just a few weeks after it secured $30 million in funding.

The 20 percent cut in staff is the second round of layoffs for the 2-year-old company, which recently adjusted its business model in an effort to quickly turn a profit.

Despite the latest influx of cash from United News & Media, company executives said it was necessary to trim staff given the steady decline of funding in the tech industry, where unsympathetic venture capitalists insist on seeing profits before investing.

On Wednesday morning, 70 employees were called to executive offices, and one by one, they were told of the layoffs. Each was given a "generous" severance package, according to the company, the details of which were not available.

Like many other dot-com companies, Creative Planet "went through a period where the mantra was, 'Grow at all cost, and figure out the profitability later,'" a company representative said. "Now the mantra is, 'We gotta make a profit,' and in order to get there we have to tighten our belts."

Creative Planet is not alone. Just this month, at least 15 companies have reduced their staffs, including Web services company Scient, which cut about 460 jobs in a restructuring effort to lower costs.

In November, dot-coms announced a record 8,789 jobs, a 55 percent increase from October's record total of 5,677, according to international outplacement specialists at Challenger, Gray & Christmas.

Los Angeles-based Creative Planet was founded in 1998 as a Web portal featuring online entertainment news. In August, the company was forced to reconsider its business model when it became obvious that content would not pay off.

The organization turned to a business-to-business model, providing Hollywood producers with a central location to find materials for sets, an actor list, and other items necessary to create a movie or TV show. At the same time, the company distanced itself from other online entertainment businesses that were struggling to survive in the competitive market.

But Creative Planet couldn't shield itself entirely from market conditions. In August, staff adjustments led the company to lay off about 30 employees, most of whom worked on the publication end of the business, a company representative said.

Company executives insist the staff reduction is not a step toward dot-com death.

"We intend to lead and prosper in this new era based upon a sharp focus on our key products, great customer service, and the swift realization of profitability," chief executive Allen DeBevoise said in a statement. "The best is yet to come for this company."

Forrester Research entertainment analyst Eric Scheirer agrees that the gloomy news appears to be nothing more than an adjustment and that Creative Planet still has a place in tinsel town.

"It appears routine," he said. "They're jettisoning unnecessary staff and focusing to become supplier for producers. They have a very different business model than other online entertainment companies."

The company will continue to focus on its products: Movie Magic, budgeting and scheduling software for producers, and Studio Systems, a database of industry contacts. Recently, Creative Planet released a wireless version of Movie Magic so production crew members can access information from remote locations.