Microsoft to Slash Internet Workers, Web Sites

In a surprise move that underscores Microsoft’s struggle in its attempt to develop content for the Internet, the software giant said it is laying off hundreds of part-time workers and canceling half the Web sites it launched last fall on its revamped Internet service, Microsoft Network.

Microsoft sent e-mail to its MSN producers earlier this month, telling them they would have to cut 30% to 40% of their temporary workers. The cutbacks, which caught many employees off guard, came in concert with a decision in May to cancel 10 of the 20 Web sites MSN launched when Microsoft revamped its online service to focus on entertainment programs.

Bob Bejan, who heads the effort to develop MSN content, said the cutbacks are part of an attempt to adopt the Hollywood-style practice of hiring and firing as production needs change. Bejan, a former executive at Warner Interactive who earlier had his own interactive-film business, joined Microsoft last year.

“The role of labor in media is accordion in nature,” Bejan said. “You gear up when you need people. Then you gear down. Finally, we are doing that.”

Among the “shows” that will be pulled when the “season” ends in May are “15 Seconds of Fame,” a comedy based on stories sent in by subscribers; “Retrospect 360,” a history magazine; and “475 Madison Avenue,” a soap opera. The canceled shows will be replaced by 14 new ones that Bejan said will be “light-years better.”

Microsoft has been spending hundreds of millions of dollars developing news, travel and investor sites in hopes of building a major presence on the Internet that will attract new advertising revenue and subscribers.

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MSN has 2 million subscribers who pay $20 a month for the Internet service. But analysts said Microsoft, like other Web businesses, is still deeply in the red with its Internet efforts.

“Microsoft is spending a lot of money [on the Internet], but it’s a luxury they can afford,” said Scott McAdams, an analyst at Ragen MacKenzie in Seattle.

Bejan said MSN is on target based on early projections and that recent cutbacks do not represent an overall reduction in spending on its Internet efforts.

Still, many at “Red West,” Microsoft’s interactive-media satellite campus in Redmond, were upset by the abruptness and scale of the layoffs.

Temporary workers, many of whom had three- to six-month contracts, were given just one week’s notice of their termination, according to Microsoft employees.

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“It came as a surprise,” said one employee who asked not to be identified. “Microsoft rarely goes through purges like this.”

Last fall, Microsoft dismissed 120 workers shortly before the company sold its Canyon Park software manufacturing plant. In 1993, it cut about 300 employees as part of a major restructuring.

Although Microsoft’s contracts for temporary workers allow the company to lay them off on short notice, Microsoft has typically waited until contracts have ended before letting workers go.

Bejan defended the short notices. “It’s the nature of freelancing,” he said. He declined to confirm how many people will be laid off and said rumors within Microsoft that as many as 800 workers might be affected are vastly overstated.

Bejan said MSN’s overall budget has not been cut and that many of the contractors could be rehired for future shows.

“Historically, Microsoft has ended up keeping contractors on from one project to another,” he said. “That reduces your ability to produce nimbly.”