Earlier today, Silicon Alley Insider reported that layoffs at AOL, which had been announced in January, were finally taking place.

Actually, said an AOL insider, about 10 percent of the layoffs, or 70 people, have been let go since the announcement. The pace just got ratcheted up today, adding another 300 to the pyre at the troubled Time Warner (TWX) online division.

But, said several sources, the slashing of staff might go well beyond what has been announced, as AOL continues to drill down on its three-pronged strategy: social networking and communications (People Networks), content (MediaGlow) and advertising (Platform-A).

That’s no surprise since AOL’s options have landed, to say the least, in that dreaded rock-and-hard place.

The interest by Yahoo (YHOO) in merging with AOL, for example, has waxed and waned–it’s waned right now, sources said, though not completely–and there seem to be no true suitors on the horizon.

And new Platform-A head (and former Yahoo sales exec) Greg Coleman–whose business has to drive revenue growth–cannot perform miracles in such a weak environment, no matter what cool new products and offerings either People Networks head Joanna Shields or MediaGlow President Bill Wilson create.

Thus, with the ever-weakening economy, there is still fat to be cut out, especially since Time Warner CEO Jeff Bewkes either has to sell AOL off or make it work a whole lot better.

And working better likely means more cuts–and a whole lot more of them.

That’s caused a lot of people inside AOL and also a wider circle at Time Warner to increasingly point the finger of blame at AOL CEO Randy Falco, wondering if and when he will suffer too.

“Why Randy Falco gets to keep his job is a mystery to a lot of people,” said one top exec at another division.

While one might look at, say, the media giant’s magazine division and ask the same of its head, Ann Moore, the more obvious answer is that times are tough all over and not just at Time Warner.

Said an AOL insider who does not like Falco’s leadership, but was sympathetic: “He probably should have pushed to sell it off more when times were better, but that was being run by corporate, so now he just has to deal with a weak economy and an online property whose value has been declining for a long time.”

In any case, for now, there’s no joy in Mudville. When the domestic layoffs are done by the end of this month, a source said, the company will turn to international firings (it’s harder to dump folks in Europe, apparently).

But, as another baseball maxim goes: At least when it comes to cuts at AOL, it’s never over until it’s over.

Time Inc., the largest magazine company in the world, is laying off hundreds and reorganizing itself drastically, due to tough economic conditions, especially in advertising, as well as the more inexorable diminishing of its business as readers move to the Web.

Time Inc. is a unit of Time Warner (TWX), as is the AOL online unit.

Time Inc. CEO Ann Moore penned the email memo to employees tonight. She tried to tout gains in its digital business–part of the reason for the reorg is to move more of its content to Web platforms–noting 26 million people visit its Time Inc. sites monthly.

Which is, well, still not as big as it should be.

Moore, as well as Time Warner CEO Jeff Bewkes, was interviewed by me onstage at two different D: All Things Digital conferences, where the challenges facing the magazine business were discussed by both.

Those challenges, obviously, continue.

Both videos are below.

Time Inc. CEO Ann Moore at D5, May 2007:

Time Warner CEO Jeff Bewkes at D6, May 2008 (Part 4 of 4):

And here’s the entire Moore memo on the layoffs and reorg:

From: Moore, Ann – Executive Administration
Sent: Tue Oct 28 18:00:37 2008
Subject: Staff Announcement

October 28, 2008

To: Time Inc. Employees
From: Ann Moore
Re: Staff Announcement

As all of you are aware, industry conditions have been challenging due to the financial crisis, which has produced sharp decreases in advertising spending. This is expected to continue through most of 2009.

It’s important that we at Time Inc. react quickly to this new reality in order to maintain our financial strength, build our market position, and sharpen our ability to bounce back at the first signs of economic recovery. All the while we must continue to give our readers and audience the high quality editorial products they have come to expect from our publications and websites.

This is a challenge, unlike any we’ve seen before. And after much careful study and consultation with many of you who run our businesses, I have concluded that it is no longer possible to operate our company with the same decentralized management structure that served us so well during our many years of sustained growth.

So, effective tomorrow, we are going to implement a much more centralized management structure, organized into three business units that will group together titles that share similar audiences, advertisers, and the talents and skills of their staffs. The goal is to enable our company to move faster, go to market smarter, save significant costs, and employ our editorial resources more efficiently.

In broad strokes, here is how it will work:

Business Units. Time Inc.’s 24 U.S. magazines and companion web sites will be grouped into three business units, each reporting to a senior corporate executive. Each unit will have a similar structure that will include four key executives to direct the ad sales, digital business, financial and editorial efforts across that group. One of the most significant centralizing features of this new structure is that each of the three units will have one General Manager, responsible for all budgeting in the unit, who will report directly to Time Inc. EVP and CFO Howard Averill, with a dotted line to their respective senior operating executive.

The three Business Units will consist of:

* News: the existing print and digital properties in the TIME group, the Fortune|Money group, and the Sports Illustrated group, as well as Life.com and GEE. John Squires, EVP Time Inc. will manage the News Business Unit.
* Style and Entertainment: the existing print and digital properties in the PEOPLE group, InStyle, Entertainment Weekly, and Essence. I will act as the EVP for this group so the Style and Entertainment Business Unit will report to me.
* Lifestyle: the existing print and digital properties of Real Simple, This Old House, All You, Southern Living, Cooking Light, Sunset, Health, Cottage Living, Coastal Living, and Southern Accents, along with MyRecipes.com and MyHomeIdeas.com. Sylvia Auton, EVP Time Inc. will manage the Lifestyle Business Unit, while also retaining responsibility for IPC Media.

Editorial. John Huey continues as Time Inc.’s Editor-in-Chief, overseeing the News Business Unit Managing Editors and Martha Nelson, the Managing Editor of the Style and Entertainment Business Unit. In editorial alone we have seen three recent examples of how this sharing across titles can work to our benefit. During the summer Olympics, Sports Illustrated set up a system to supply Time.com with a fantastic array of photos from the games; in Europe and Asia, FORTUNE and TIME already are sharing correspondents; and, of course, the most visible example was the recent TIME cover story on the economy written by FORTUNE managing editor Andy Serwer and Allan Sloan. In the new structure we will see much more of this kind of cooperation.

Time Inc. Advertising Sales and Marketing. Given the difficult ad sales environment, it is critical that all of our brands work together to efficiently and effectively offer advertisers the solutions they need. For this reason, we are creating Time Inc. Advertising Sales and Marketing, a group that will be charged with setting and executing corporate ad sales strategy along with the ad sales head for each business unit. Stephanie George will become President of Time Inc. Advertising Sales and Marketing and will remain a Time Inc. EVP. She will also remain on the Board of American Express Publishing.

Time Inc. Consumer Marketing and Sales. Consumer Marketing and Sales will be run by Brian Wolfe, who has been promoted to EVP and will report directly to me. All Consumer Marketing and Sales activities will be centralized under Brian. This department will be responsible for circulation net income across all U.S. Magazines, as well as Synapse, QSP, Time Warner Retail, Time Customer Service, and TW4, Time Inc.’s international fulfillment operation.

Everyone in the Consumer Marketing organization should be proud of their accomplishments in this difficult environment–some of our largest newsstand titles are having record years and we are seeing strong circulation net income results across the company. These organizational changes, along with the recent acquisition of QSP and the incorporation of Synapse into Time Inc. Consumer Marketing and Sales, will give Brian and his team the ability to continue this momentum by making the best decisions for the company as a whole, and making them quickly and definitively.

Finally, I’m pleased to announce the promotions of Kerry Bessey and Maurice Edelson to EVP, Time Inc.

Time Inc. Senior Management along with the Business Unit leaders are working on restructuring within each group, and will announce further changes in the coming weeks. While the broader economy and the advertising industry both continue to present challenges, I know we can weather this storm and emerge as an even stronger company when the economy begins to recover. We are still a very profitable company. Our cash flow is strong. We have made tremendous progress with our digital business. Each month, more than 26 million people visit Time Inc. websites. We know our consumers continue to value our magazines and websites. We have the top brands in all the categories where we publish and we’re finding exciting new ways to expand our titles beyond the printed page and the web. The importance of fact-based journalism has never been clearer given the many serious issues facing the world and our core competency, trusted editing skills, has never been more needed than in this time of too much information.

I’d like to thank you all for your continued hard work.

A.M.

Ann Moore says Time Inc. really does get the Internet.

It is not as if the magazine giant has had a lot of choice in that matter, but the CEO of Time Inc. seems to embrace the inevitable with resolve and even excitement–which is rare in old-media circles still–in this interview.

By way of background, D: All Things Digital, the annual tech and media conference Walt Mossberg and I host, has been sold out with a long wait list every year we have put it on.

That has meant only a few hundred people can see the interviews and also demos we do live onstage with some of the tech and media industry’s most interesting and important players and products.

The lineups have included Microsoft’s Bill Gates and Apple’s Steve Jobs, as well as Eric Schmidt of Google, IAC’s Barry Diller, Meg Whitman of eBay, Cisco’s John Chambers and many others.

And we’ve demoed stuff like the Treo when it first came out, as well as digital toilets, Wi-Fi phones and much more.

We usually post the photos and videos of the interviews and demos six or more months after they take place on a separate conference site. This year, our Digital Daily’s John Paczkowski liveblogged D5 and also posted video highlights from all of the sessions immediately on our newly launched site here.

Now, we are posting videos of every session of the 2007 conference here, in full, and we have made all our photo galleries, hosted by SmugMug and mostly shot by our fabulous Asa Mathat, public too. You can also access our videos via the site’s master player here.

Every day, I am going to highlight a different interview or demo from the conference.

Today, Moore gets the focus:

The interviews featured are with famed filmmaker George Lucas, CBS CEO Les Moonves, Time Inc. CEO Ann Moore, Google CEO Eric Schmidt, Viacom CEO Philippe Dauman and a solo interview with Apple legend Steve Jobs.

Here’s the video I did for the tab on the conference, focusing on the strides made by traditional media in dealing with the Web and its impact.

In related D news, our official conference page has now been relocated to this site from its old one, and you can now access it here. You can get all sorts of information, as well as pictures and videos from the first through the fourth D conferences.

We will not be opening registration for D6, which will take place May 27 to 29, 2008, until the fall, although Walt and I are already thinking about next year’s program.

Full pictures and video for D5 will be up on this site soon, first for conference attendees and then for everyone. Until then, check out our highlights of the conference with blogs, video and pictures here.

“We could create such a currency,” said Bewkes at an investment conference, noting that AOL did not have the heft that other players like Yahoo and Google did, because it did not stand alone as a pure-play Web firm. “We certainly contemplated doing that.”

Besides Bewkes’s stating of the obviously obvious, it is a contemplation that is, as the Johnny Mathis and Deniece Williams song goes, too much, too little, too late. Here’s why:

TOO MUCH: Face it, Time Warner’s Hamlet act over what to do with AOL is of the most peculiar variety, given that it has been going on since the forces of Time Warner seized back the company from the interlopers from AOL more than four years ago, after what was billed as the deal of the new century turned out to be more like a steal.

But instead of forging ahead after they regained control and doubling down on the company’s digital bets right after the first Internet bubble burst, the pain and rage caused by the merger debacle caused the company to maintain a vise grip on AOL that allowed its power and influence to wither rather than flourish as the Web’s prospects brightened again.

Just using MySpace, which burst on the scene in the last two years, as an example: It took user-generated content, social networking and communications tools and parlayed them into one of the biggest sites on the Internet today. Sadly, each one of those qualities that allowed MySpace to soar were once the major elements of AOL and, I dare say, where such online practices were invented.

TOO LITTLE: OK, fine, you maybe want to spin it out? Well, no one I have interviewed as potential investors or even buyers wants to do that if Time Warner holds onto too big a stake in the venture. That desire not to lose control of AOL by Time Warner is problematic for anyone considering making a big bet with the service, which–though declining in relevance and sheer power–is still one of the bigger and most well-known brands on the Web.

If Time Warner is serious about giving AOL the wings it needs to fly, it has to not clip them in the process and not keep it too close to the nest. As Time Inc. CEO Ann Moore noted in an interview at D5 last week, its magazine sites are doing a lot better since they seized control of their own destiny and are making choices based on individual needs and consumer desire.

AOL needs to be able to act as if it is not beholden to anyone, except its customers. One of its greatest recent successes, TMZ.com (which I did a post about here), a gossip site, is in direct competition with Time Inc.’s People.com site. I say, bring a lot more of that on.

TOO LATE: Would that it could. While waiting, competitors have snapped up all the good start-ups that companies like AOL need to keep innovating. Luckily, AOL managed to get the most excellent Advertising.com, but it never got its hands on the really good stuff like Flickr, for example, and time is not on its side here.

And the more interesting small companies AOL has bought, like Userplane, maker of really terrific communication apps for Web sites, seem to languish within the company (though this is a problem not particular to AOL).

While I am sure to irk Time Warner with a quote from the ultimate Ghost of Disastrous Mergers Past, former AOL Time Warner (when it was called that) Chairman Steve Case said it best when he was interviewed from the stage at D5 last week, too.

I asked him about AOL’s prospects and his message was on point, as painful as it might be for Time Warner execs to hear from such a source:

“I am disappointed that 10 years ago we were kind of in the catbird seat and, for a variety of reasons, [AOL]’s lost some of that momentum,” he said. “It’s still a major force … but it is certainly not the epicenter of the industry that it was once before.”

It surely is not, and no amount of Wall Street daydreaming can fix that.

And that’s without what was clearly the blockbuster joint interview with Microsoft’s Bill Gates and Steve Jobs of Apple, which got a mountain of attention, as it deserves for both its historic implications (the two icons of tech in a rare analog appearance together) and its sheer drama (PC guy meets Mac guy, except in real life!).

While it was not the WrestleMania some would have preferred, I thought it was riveting to see two people with very little left to prove about anything in their professional careers and who will be in the history books willing to go out on a bit of a limb and talk from a more personal place.

In addition, watching these longtime rivals and also collaborators kibitz about their tech-war stories, each correcting the other’s memories, was really interesting. Here is a great comic strip from the Joy of Tech Web site about the interview that says it all.

But outside of the glare of the pairing, there were a lot of highlights and insights I gleaned from the other onstage interviews.

1. THE MSM FINALLY GETS IT: One of the things that struck me was how comfortable and easygoing all the traditional media executives interviewed were. CBS’s Les Moonves, Peter Chernin of News Corp., Ann Moore of Time Inc. and even suing-Google-for-a-billion Philippe Dauman of Viacom all seemed less fearful of the Web than ready and eager to use it for their benefit.

Of course, there are copyright issues for all, which was articulately explained by Dauman (who came off as reasonable in his case against Google’s YouTube), but all seemed to understand the need to find new business models and new distribution methods for their content.

They also had the funniest videos–here is Moore’s faux Geico ad with actor Mario Cantone and Viacom’s genius Stephen Colbert monologue.

2. DANCING WITH THE TECH STARS: On the flip side of that, both Google’s Eric Schmidt and YouTube’s Chad Hurley and Steve Chen need to at least be a bit more respectful in public about other peoples’ work and rights. It cannot and will not be, as much as I love the idea of empowerment of the consumer, just the “community” that decides what is OK to post.

And, as smart as they might be, it’s hard to rely simply on their assurances that their brainiac engineers will come up with a way soon to stop copyright theft. This is a delicate dance that Google must pull off without two left–and arrogant–feet.

Still, YouTube’s intro video was very sweet, especially Chen and Hurley scarfing donuts.

3. GEORGE LUCAS IS NOT SHY: While the legendary filmmaker has always been known as shy, Lucas had not even dropped his bags on the floor of the hotel lobby before he was deep in conversation and debate about the digital sector with a plethora of folks gathered round.

And he did not mind being pugnacious either, telling YouTube’s Hurley and Chen that they should endow a film school to make up for all the crappy video they had unleashed on the world.

Onstage, Lucas, no lover of Hollywood’s machinations either, gave a great label to some video on the Web, which he called “circus,” or, better still, “throwing puppies on a highway,” compared to “art” that endures.

4. SEN. JOHN MCCAIN IS ALSO NOT SHY: About sticking to his guns, so to speak, related to his stance to continue fighting in Iraq and also about the risks posed by the spread, if we withdraw too early, of Islamic Jihadism.

But Microsoft’s Steve Ballmer and Cisco’s John Chambers do look the part of cabinet members here. What about Steve Case, whose new businesses center around health, as surgeon general? Or Charles Simonyi, former Microsoft exec and recent space traveler, for head of NASA?

But, whatever your view about the war, I think we can all respectfully disagree with Sen. McCain’s contention that cellphone service in the U.S. is top-notch. Clearly, he has never been to the black hole of mobile coverage near Silicon Valley’s Sand Hill Road lately.

So here’s one of my movies to show you how we prepare for the annual conference, which is highlighted this year by a joint interview with Microsoft’s Bill Gates and Apple’s Steve Jobs, the twin icons of the tech industry.

We’ll kick off the conference tomorrow night with an interview with Sen. John McCain, who is in the race to become the Republican nominee for president of the United States. We will talk to him about that, as well as the war in Iraq, but also hope to discuss a plethora of digital issues with him. McCain is one of the few politicians who knows a thing or two about the media, telecom and Web sectors.

Other interviewees on Wednesday and Thursday include: Microsoft CEO Steve Ballmer; CBS CEO Les Moonves; News Corp. President Peter Chernin; Cisco CEO John Chambers; former AOL CEO Steve Case, who will talk about his new company, Revolution; famed director and producer George Lucas; Time Inc. CEO Ann Moore; Google CEO Eric Schmidt; YouTube founders Steve Chen and Chad Hurley; Philippe Dauman, CEO of Viacom; and space tourist (and former Microsoft exec) Charles Simonyi.

We’ll also have demos from tech players like Palm legend Jeff Hawkins and others. And we are also excited to have singer/songwriter Jill Sobule, who will perform several times throughout.

We’ll have full coverage of D5 on our site, starting tomorrow night, including liveblogging by Digital Daily’s John Paczkowski, pictures, video excerpts and more.