TOKYO — Media and Internet giant Usen has announced that wholly owned subsid Gaga Communications is pulling out of the pic production and distribution biz.

Usen prexy Yasuhide Uno told shareholders on April 16 that the costs and risks of Gaga’s content biz, including production and acquisition, were too high to sustain profitability. The unit lost $4.9 million in the first half of fiscal 2008.

Gaga has had successes with its recent line-up, including “The Golden Compass” and the BBC docu “Earth,” but its own produced pics, including the teen musical drama “Back Dancers” and drama “First Love,” have struggled at the Japanese BO.

The in-house production unit, which was started by producer Shinya Kawai, will shut down by August. In January Gaga shuttered its Y3 billion ($29.4 million) pic production fund, two years into its projected 10-year run.

Gaga’s 2008 line-up includes the Philip K. Dick sci fi pic “Next,” the Stallone comeback “Rambo 4,” the 3-D adventure “Journey 3-D” and the Jan de Bont car actioner “Stopping Power.” Among arthouse product on the line-up is Harmony Korine’s “Mister Lonely” and Billie August’s “Goodbye Bafana

The biggest local pic in the line-up, skedded for an April 26 bow, is “Shaolin Girl,” a martial arts epic starring Kou Shibasaki (“Sinking of Japan”) and produced by Chihiro Kameyama and helmed by Katsuyuki Motoyuki — the team that made the biggest ever local live-action pic: “Bayside Shakedown,” as well as many other hits under the Fuji TV banner. Gaga, however, is co-distribbing the pic with Toho.

Gaga’s own productions include the hit 2006 TV toon “Night Head: Genesis,” but the company will also exit the toon biz as well as live-action pics.

Usen will focus its contents efforts on Gyao, an Internet video portal site that is set for a major relaunch by July 1.

Also, in June Gyao will start a pay webcasting service called Gyao Next. Users will be able to register for the new service starting on April 25, the second anniversary of Gyao’s launch.

Modeled on Apple TV, the service will webcast a variety of content, including karaoke, music and pics, that subs can view on their home TVs.

By the end of March Gyao had 14 million registered users, who can access music, sports, TV drama and pics on the site.

Usen is also holding open the possibility of relaunching into the pic acquisitions and distribution biz with outside partners.

Usen as whole posted sales of $1.33 billion for the first half, down 11.6% from the same period the previous year, while operating profits totaled $35.82 million, a drop of 44.7%.