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End of the Line for New Line

28 Feb, 2008 By: Thomas A., Erik G.

New Line Cinema, the scrappy independent film company that celebrated its 40th birthday last year, is being folded into Warner Bros. Entertainment, parent Time Warner announced Feb. 28.

The consolidation of Time Warner's filmed entertainment businesses will see the departure of New Line co-chairmen and co-CEOs Robert Shaye and Michael Lynne.

New Line, known for such popular theatrical and home video franchises as “Nightmare on Elm Street,” “Austin Powers” and “The Lord of the Rings,” will maintain separate development, production, marketing, distribution and business-affairs operations, but will report in to Warner Bros. Entertainment chairman and CEO Barry Meyer and president and COO Alan Horn.

Jeff Robinov, president of the Warner Bros. Picture Group, also will play a key role in New Line's future as it moves from a separate entity to a unit of Warner Bros.

The company employs more than 600 people in Los Angeles and New York. It is unclear at this point how many will lose their jobs, although a significant thinning of the ranks is likely.

The fate of New Line Home Entertainment, which is situated just below the six major studios and Lionsgate in DVD market share, is uncertain, but product will likely go to Warner as well, sources said.

“We are moving quickly to improve our business performance and financial returns,” said Time Warner president and CEO Jeff Bewkes. “New Line has built a strong franchise of cutting-edge entertainment. We can enhance its value by combining it with Warner Bros.”

Bewkes noted that there is a trend in Hollywood toward fewer movie releases. “New Line and Warner Bros. will now have more complementary release slates, with New Line focusing on genres that have been its strength,” he said. “With the growing importance of international revenue, it makes sense for New Line to retain its international film rights and to exploit them through Warner Bros.' global distribution infrastructure.”

Bewkes said Time Warner also “can take better advantage of digital distribution platforms by combining our studios.”

“These changes will enhance our revenue opportunities and drive dramatic cost efficiencies and higher margins at New Line,” he said.

The move to combine the two film companies was hinted at in early February, during Bewkes' first earnings call as CEO. In that call, he said Time Warner would immediately implement 15% across-the-board cost cuts, beginning with the elimination of 100 jobs at the corporate level, which he said would save $50 million annually.

He said the trend toward fewer studio theatrical releases, combined with the greater importance of foreign revenue, brought into question the value of having two completely separate studio infrastructures at Warner and New Line.

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