Cruch Time for AOL Time Warner's Filmed Entertainment

Warner Bros., New Line Have Made Cuts Demanded by Parent Company but Don't Expect More

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For Warner Bros. and New Line Cinema, the first cuts were the deepest.

Executives at AOL Time Warner's film and TV production divisions feel they did more than their share in cutting to meet the parent company's aggressive growth plans.

"We literally gave the office," said one senior Warner executive. After the merger was completed in January, Warner Bros. said it would sell off or close 120 U.S. retail stores. All told, the unit will cut some 3,500 jobs, which will save tens of millions of dollars, according to analysts. "The stores were always for strategic reasons," said the Warner executive. "Not for generating revenue."

Warner Bros. also slimmed down its Internet operations-combining its Warner Bros. Entertaindom and Warner Bros. Online operation, eliminating another 100 jobs.

But Warner doesn't plan to cut much else. "There is some belt tightening," said the Warner executive. "But there's been no wholesale cuts."

For instance, Lorenzo di Bonaventura, Warner Bros. Pictures president of production, won't see any drop-off in his budget. Warner's 2001 film slate will number some 29 movies this year-about the same as last year.

This year, Warner Bros. is in second place in market share to Viacom's Paramount with an 11.6% market share and $260.3 million in box office revenue, according to AC Nielsen EDI through April 29 (Paramount has a 15.2% market share and $341.9 million). Top movies this year for Warner Bros. include "Exit Wounds" and "Driven" which both debuted at No. 1.

One area of cost savings may come from using AOL Time Warner to promote coming movies. Overall, the Motion Picture Association of America estimates the average advertising cost for a 2001 film (which also includes the cost of prints) climbed to $27.3 million from $24.5 million the year before. Brad Ball, president of theatrical marketing for Warner Bros., said he is evaluating several options within AOL Time Warner's array of TV, cable and Internet marketing and advertising outlets. "We want to tap into the [entire] company's 2.5 billion monthly impressions," he said.

New Line Cinema has also trimmed back. Early this year it cut back some 120 jobs-about 20% of its work force.

Movie analysts speculate New Line might also make bigger cuts-eliminating its distribution and marketing divisions-and become a production company as part of Warner Bros. But that's unlikely to happen till next year. New Line is in the midst of a major push marketing the first part of a $270 million "The Lord of the Rings" trilogy.

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