Earlier this year, it was the hottest buzz in town: Microsoft Corp. was on the prowl in Hollywood, looking to help small production houses put TV-like shows on its online Microsoft Network.
Now, as part of a massive refocusing of the struggling MSN away from entertainment and toward service-oriented programming, Microsoft's L.A. unit has had its wings clipped.
"Our customers are telling us they want value out of the time they spend online," said Ed Graczyk, lead product manager for Microsoft Network. "So we are now focusing less on raw entertainment and more on programming that has an entertainment component but is also useful."
Graczyck said Microsoft has pulled the plug on all of its serials. He refused to say how many shows were cancelled, but said they were not renewed over a period between June and October.
In addition, Jamie Fragen, the former Amblin Entertainment executive who was in charge of placing the serials on MSN, was reassigned in October to a marketing job. No replacement has been named.
Fragen said she made the move for "personal reasons."
"I'd been doing the same thing for almost two years and felt I needed a change," she said. "Every project that I'd been involved in on the Web was looking to sponsors and I realized that area needed a lot of work."
The MSN shows included comedies, such as "Second City Naked News," and interactive dramas, like "Great Stuff" produced by Brentwood-based Liz & S Productions. Most were 13-part series; some of the projects never ended up running because of lack of user interest.
The scaling-back is part of a larger effort to transform MSN, which is reportedly losing an estimated $200 million a year because it has failed to keep pace with changing consumer tastes and Internet competitors like America Online Inc.
Just last week, Microsoft Network launched two new programs: "Get Working," a career-oriented show for 20-somethings and "Mauny's Kitchen," a cooking show. Both programs are produced in Seattle, near Microsoft's headquarters. Neither requires the specialized Hollywood-style talent that is found in Los Angeles.
"The audience never materialized for the entertainment shows and the dollars didn't follow," said Jim Jonassen, president of the Los Angeles New Media Roundtable, an association that represents many of the firms producing Internet programming. "It's become apparent that the Internet is not the medium for this type of entertainment. It's not suited for people to watch things like 'Seinfeld.' "
Despite the cancellations, Microsoft still has a formidable Hollywood presence. Its MSN distribution deals with Disney Online, Paramount Pictures and Jim Henson Productions remain intact, as does its investment in DreamWorks SKG.
In fact, Graczyk said, the Henson deal will formally kick off with shows featuring Muppet characters early next year.
Industry observers say Microsoft's shift away from shows developed by small production houses is part of a re-evaluation of markets, one of Microsoft's trademarks.
"Microsoft likes to cover all the bases and then go with whatever takes hold," said Art Rockwell, an analyst with Yeager Capital Markets. "I never took their effort with the smaller production houses too seriously. It's hard to go about it, especially when it's not a business you know."
As Microsoft phases out its entertainment programming, it has been stepping up its focus on Web site development and partnerships with Internet service providers.
Microsoft brought in Renae Ross as its regional Internet business development manager last June.
"In L.A., a lot of Web developers started out designing Web pages for the Hollywood studios," Ross said. "Then they went to the corporate side. Now, the real trend is e-commerce," or electronic commerce, she said.
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