The MCI/News Corp. online joint venture, as expected, on Thursday let go close to 300 of its employees. Insiders expect Scott Kurnit to resign shortly, although he told Advertising Age he will remain president-CEO of the service through a transition period.
Most cuts were made in the marketing, technology and platform-development areas of the venture. Content areas also had to let go of some employees; the ad sales staff remains untouched. A planned TV, print and direct mail campaign from MCI agency Messner Vetere Berger McNamee Schmetterer/Euro RSCG also was shelved. Budget was not disclosed.
At a meeting Thursday morning, Anthea Disney, editor in chief of the service, told those employees being let go--about 40% of the total staff--that she was ``heartbroken,'' while Mr. Kurnit told them ``it was the hardest thing he ever had to do.'' Insiders say Ms. Disney will soon be leaving the venture to work for HarperCollins; Ms. Disney denies the rumor.
``We had a great group of people who cared about what we were putting together,'' said Mr. Kurnit. ``No one was let go based on the quality of their work; everyone was very talented. ... It's been a difficult couple of weeks and I must say that these employees are some of the most caring and understanding people around.''
Jonathan Miller, news editor of the joint venture's editorial group, resigned Wednesday. Remaining employees, numbering some 250 people, gathered Thursday afternoon for a meeting to discuss future plans of the service.
The venture, still headed by Mr. Kurnit and Ms. Disney, will launch officially next week on the Web with advertising. Ad rates were not disclosed. The site will consist of an Internet directory called iGuide as well as 18 content areas that focus on specific segments like women, sports, children, etc.
``The service was originally planned to offer access, client software and content,'' said Mr. Kurnit. ``With MCI's redirection, the service for the moment will be holding back on its access and client software offerings and focusing more on content development.''
Employees who were let go received 10 weeks of severance pay, including health benefits. News Corp. said it will also try to relocate them to somewhere within News Corp. or assist them in finding jobs elsewhere.
Last week, MCI announced a separate online alliance with Microsoft Corp., leading many industry followers to question MCI's loyalty to its online venture with News Corp. The venture had suffered a series of setbacks since its inception last August. Insiders say the cultures of executives inside MCI and News Corp. clashed, and the two companies were never ``on the same page.'' A budget was never approved, service names were disputed and battles over advertising and content concerns slowed the service's launch.
News Corp. is currently in negotiations with Oracle Corp. to take on a stake in the joint venture company. MCI has cut its stake to 15% from its original 50%.
--Kim Cleland and Chuck Ross
Copyright February 1996 Crain Communications Inc.