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MTVi cuts staff by 25 percent

The Viacom-owned Internet unit says it will lay off 105 employees, nearly 25 percent of its staff, as part of a reorganization.

Viacom's MTVi will lay off 105 employees, nearly 25 percent of its staff, as part of a reorganization, Viacom executives said today.

MTVi, the Internet arm of MTV Networks, will cut editorial, technology and marketing staff. The editorial and technology departments will be trimmed to consolidate operations, while marketing will be absorbed into MTVi's individual sites: MTV.com, VH1.com and SonicNet.

The changes at MTVi underscore the difficulties that traditional media companies have faced with their Internet plays. Like Viacom, Walt Disney and General Electric have spent considerable resources on their Internet units, Go.com and NBC Internet, respectively. But most traditional companies have yet to create formidable challenges to Net-only leaders.

More importantly for media companies such as Viacom, the Web has lost its reputation as a separate, unruly entity that can attract high valuations. Rather, Viacom's Web divisions are becoming more integrated into its TV programming, serving as additional features for viewers.

Executives at MTV Networks, however, maintain that MTVi will remain a separate division within MTV Networks. The reorganization will bring the Internet unit closer to the cable station's programming and will help it develop shows that meld the Web with television. MTVi also will continue to receive $100 million worth of promotions on MTV Networks stations over 5 years.

"The role of the MTVi Group remains the same--to lead in the space and maintain a close connection to the networks but maintain autonomy as an Internet company," said Judy McGrath, president of MTV Group.

As previously reported, Viacom has been considering a reorganization of MTVi for at least a month. In the aftermath of Viacom's acquisition of CBS, executives began to question whether it made sense to operate a separate Internet holding company, according to sources. Additionally, MTVi was losing money and had an unclear time frame for profitability, sources said.

MTVi was created in 1999 to oversee the online efforts of MTV.com, VH1.com and music editorial site SonicNet. The division was largely created for Viacom to explore ways to tap Internet currency in the bull market. However, the market downturn for Web content companies dimmed Viacom executives' hopes in pursuing an initial public offering for MTVi; they have all but shelved the possibility.

"We are not going public right now," McGrath said. "It wouldn't be the smartest thing to do, but we're going to wait and see."