Oxygen.com Cuts; to Become Promotional Arm for TV Unit

Women-targeted Web portal Oxygen.com is set for a major revamping as its cable television parent, Oxygen Media, cuts staff at the online unit.

As a result of the reductions — which affect about 30 of the unit’s 44 employees — the site will essentially serve as a promotional tool for shows on its New York-based parent company’s cable television network. Original content, including articles, chat rooms and forum areas will likely be closed as a result.

“We are doing extremely well on the television side of our business,” Oxygen Chief Executive and Chairwoman Geraldine Laybourne wrote in an internal e-mail obtained by internetnews.com. “However, the online side is simply not structured in a way that it can sustain itself economically … We’re not abandoning interactivity as an important component of our business. We have always believed, and continue to believe, that the online and television mediums are complementary — and that interactivity will play a strategic role for Oxygen. However, for now, we need to focus on the television component of our business and take a less aggressive stand in the interactive space.”

Four-year-old Oxygen Media, which includes Oprah Winfrey’s Harpo Productions among its investors, also operates Oprah.com, which is not expected to be affected by the cuts.

For Oxygen.com, which, like many online publishers, has reeled from the Web advertising decline, the news does not come unexpectedly. Laybourne first outlined plans to reduce the online portion of the business to better concentrate on the cable side in late 2000, following the announcement of a second, $100 million investment from Paul Allen’s Vulcan Ventures. Shortly thereafter, the company pink-slipped about 65 online employees and closed an office in Seattle.

Oxygen.com’s parent, too, has rejiggered its operations several times, cutting back on programming and staff in waves since 2000.

The news comes just days after The Wall Street Journal reported that Oxygen Media is one of the advertising partners involved in several agreements with AOL Time Warner that are now under scrutiny by the New York-based media conglomerate for potentially improper accounting.

The Journal and the Washington Post have reported that a rash of recent advertising deals are being checked for evidence of the taboo accounting procedure known as “round-tripping.” According to the Journal, one of those deals was with Oxygen, in which AOL invested between $30 million to $50 million, while the women-oriented cable and Internet play agreed to purchase about $100 million in ads on AOL’s America Online.

In addition to an internal inquiry, AOL’s accounting practices are also under investigation by the U.S. Securities and Exchange Commission and the Justice Department.