New Line Cinema Folded into Warner

February 28, 2008–New Line Cinema co-chairs and co-CEOs Robert Shaye and Michael Lynne will leave the studio as part of a consolidation of Time Warner's film operations unveiled Thursday afternoon.

They are, however, “in discussions about possible future business relationships with the company,” Time Warner said.

As expected, the conglomerate announced the consolidation of its filmed entertainment businesses, Warner Entertainment and New Line, with the latter being operated as a unit of Warner.

New Line will maintain separate development, production, marketing, distribution and business affairs operations. However, it will “closely integrate and coordinate those functions with Warner to maximize film performance and operating efficiencies, achieve significant cost savings, and improve margins,” TW said.

The move came just four years after New Lines The Lord of the Rings: The Return of the King won the Best Picture Oscar and grossed $1.1 billion worldwide. Since then, however, New Lines performance has been drab with only a single breakout, Wedding Crashers.

The move to fold in New Line was not a surprise following a Feb. 6 announcement by Time Warner president and CEO Jeff Bewkes. Citng the trend toward fewer releases, Bewkes said New Line would be the focus of budget cuts and layoffs in order to save $50 million annually.

“We are moving quickly to improve our business performance and financial returns,” TW CEO Jeff Bewkes said. “Given the trend toward fewer movie releases, New Line and Warner will now have more complementary release slates, with New Line focusing on genres that have been its strength.

New Line has built a strong franchise of cutting-edge entertainment, Bewkes said. We can enhance its value by combining it with Warner. Given the trend toward fewer movie releases, New Line and Warner will now have more complementary release slates, with New Line focusing on genres that have been its strength.

Bewkes also said New Line would no longer sell off international rights to finance films. With the growing importance of international revenues, it makes sense for New Line to retain its international film rights and to exploit them through Warners global distribution infrastructure, he added. The exec said the combo would be able to take better advantage of digital distribution platforms.

In a message to New Line staffers, Shaye and Lynne said New Line will maintain its own identity and will continue to produce, market, and distribute movies. They also warned that New Line will probably be a much smaller operation and said details would be spelled out at meetings in L.A. and N.Y. on Friday.

“New Line has been our respective life's work as well as our second family,” Shaye and Lynne said. “While we're sad to be leaving, we're enormously proud to have overseen its extraordinary growth.” They added that they will now focus our efforts on exploring new entrepreneurial opportunities.

This was a painful decision, because we love New Line and the people who work here have been like our second families, Shaye and Lynne said. But we will be leaving the company with enormous pride in what all of us at New Line have accomplished together. From its humble beginnings 40 years ago, our studio has created some of the most popular and successful movies of all time.