• by January 11, 2001

(AP) - With Wall Street frowning on unprofitable Internet ventures, media companies have been doing their part in the dot-com downturn, citing profit pressures and an advertising slowdown as they cut staff in their online units.

But something else is happening as well: As they scale down their Internet divisions, media companies also are bringing them closer to the fold by canceling IPOs, cutting ties with online partners and otherwise making it clear that the Web will play a mere supporting role - not a starring one - in their future expansion plans, some analysts say.

Big Media's pullback from the Internet accelerated in the last week with announcements from News Corp. and The New York Times Co. Each company laid off online staff and severed links with Internet startups, WebMD for News Corp. and TheStreet.com for the Times.

Some analysts say more bloodshed is on the way. Most newspaper publishers are still operating unprofitable Web operations, and Disney Internet Group - the online spinoff of entertainment giant Walt Disney Co., which owns the ABC television network - has yet to lay off any of its 3,000 employees. The unit lost a staggering $217 million in the fiscal year ending in October.

"We're just at the beginning of feeling the advertising declines, and we're seeing the first round of cuts by companies to make their '01 budgets," says Tom Wolzien, a media analyst at Sanford C. Bernstein & Co. "We lived in a time when there was a lot of extra money flowing around, and that's over."

No one is talking about giving up on the Internet entirely. The question is how to maintain an online presence without making investors unhappy with costly operations at a time when slow advertising is hurting the core businesses of publishing and broadcasting.

"With the shrill of the Internet frenzy behind us, companies like the New York Times and News Corp. see that having an Internet presence to support and complement their franchises is certainly valuable, as long as its done in a fiscally prudent way," said Edward Hatch, media analyst at SG Cowen Securities Corp.

Some companies are finding that it no longer makes sense to have their Internet units operating as stand-alone businesses. News Corp. cut half of its 450 online jobs and brought those remaining back to the parent networks - Fox, Fox News Channel and Fox Sports - which will take over the production of their associated Web sites.

"During the early days of Internet growth, there was a fear that television and Web programming would rival each other," said Jon Richmond, the head of News Corp.'s online operations. "On the contrary, we have seen a strong symbiotic relationship develop between Fox's online and broadcast platforms."

Discovery Communications Inc. made a similar move last fall, drastically scaling back its plans for online expansion and scrapping projects that would have created broad-based online destinations. Instead, Discovery's Web sites will