Time Warner Consolidates Film Studios

Indie New Line Merged Into Warner Bros. but Will Have Separate Marketing, Production

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LOS ANGELES (AdAge.com) -- Ending weeks of rampant rumors in Hollywood about the future of its struggling indie film outfit, Time Warner today announced what it billed as "the consolidation of its filmed-entertainment businesses, Warner Bros. Entertainment and New Line Cinema."

According to the statement, "As part of the consolidation, New Line will be operated as a unit of Warner Bros. New Line will maintain separate development, production, marketing, distribution and business affairs operations, but will closely integrate and coordinate those functions with Warner Bros. to maximize film performance and operating efficiencies, achieve significant cost savings, and improve margins."

Jeff Bewkes, Time Warner's president-CEO, said, "Given the trend 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" -- a reference to its rough-and-tumble past as a distributor of films such as "Nightmare on Elm Street" and "Se7en."

"With the growing importance of international revenues, it makes sense for New Line to retain its international film rights and to exploit them through Warner Bros.' global distribution infrastructure," the statement continued. "We can also 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."

New Line's co-chairmen and co-CEOs, Robert Shaye and Michael Lynne, will leave the company, but in a statement said they "will now focus our efforts on exploring new entrepreneurial opportunities."

In an internal e-mail with the subject line: "Our Company," Messrs. Shaye and Lynne told their staffers the change was a "painful decision" and the coming weeks will be a "very difficult and emotional time for all of us who have worked at New Line."

Time Warner hopes that operating New Line as a unit of Warner Bros. will allow New Line to focus on the creative side of movie-making, while reducing costs and taking advantage of Warner Bros.' distribution systems.

New Line insiders tell Ad Age that Messrs. Shaye and Lynne had discussed buying the 40-year-old company back from Time Warner for $2.5 billion using Wall Street financing, but that the media conglomerate had been reluctant to accept less than $3 billion for the outfit, citing tax consequences.

Time Warner executives were not immediately available for comment at deadline. Representatives for Messrs. Shaye and Lynn could not be reached at press time.
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