Just four months after the high-profile launch of its in-house entertainment destination, America Online has slashed the unit's staff and signed a content deal with an outside source.
E! Online and America Online have formed a distribution agreement for E! Online to appear as an anchor tenant on the main screen of AOL's entertainment channel. The arrangement coincides with the layoff of 40 staffers at AOL's Entertainment Asylum--about half of the unit's employees--at a time when the online service's content partners have publicly complained of abandonment. Asylum programming chief Scott Zakarin, creator of online soap The Spot and a star of the interactive community, was also let go.
The move signals a continuation of the trend away from expensive content creation for the online service, which will no longer operate its AOL Studios production company as a separate unit. Its main competitor, Microsoft's MSN, has made a similar shift.
Entertainment Asylum launched on both AOL and the Web last October; E! Online had already been live for a year. Both offer celebrity news and Hollywood-oriented content. Entertainment Asylum has also been developing an area on its site devoted to music, in addition to the area devoted to film and television. E! Online operates a separate site called Moviefinder.com.
The agreement with AOL is E! Online's largest distribution deal to date. The company also maintains relationships with other content providers, search services, set top box providers and broadband services, including Yahoo, Microsoft's Internet Explorer 4.0, Netscape, WebTV, NetChannel, Home, MediaOne and Roadrunner. The AOL deal is part of what Jeremy Verba, president of E! Online, called a "platform-agnostic strategy." "We'll be on whatever platform is out there," he says.
Verba did not characterize the arrangement as a victory over Asylum. "AOL is smart in their strategy," Verba said. "They align with category leaders in each genre. Our anchor tenancy is equal to Asylum's. This space has room for more than one player."