I've done both - broke up with friends and tried to phase them out. I can say in my experience, phasing them out doesn't work. You consistently get sucked back into the relationship or they will not leave you alone because they can sense something is off. Breaking up with friends is hard (just like breaking up with a lover), but it ensures that they know you are not interested in being friends anymore and they don't hold on to hope that things are going to change. So, if you are no longer interested in being friends, I personally suggest ending the friendship quickly than trying to phase it out.