New Line to Be Absorbed by Warner Brothers
February 28, 2008

The studio that brought The Lord of the Rings to life and produced hits like Rush Hour, Austin Powers, and Elf will be no more, at least not in its current form, as New Line will be absorbed by its parent company, Warner Brothers. It was announced today that the 40-year-old studio will become significantly smaller and merge into part of Time Warner's Warner Bros. It's the end of an era for Bob Shaye, the New Line founder, and his longtime co-chairman and co-CEO Michael Lynne, who will leave the company. The pair made an effort to keep the very-struggling New Line alive with a reorganization plan presented to Time Warner management recently, according to The Los Angeles Times. It's unclear how many employees of New Line will lose their jobs because of the merger. There are currently 600 people employed by New Line in Los Angeles and New York.

According to the Times, New Line will still have separate development, production, marketing, distribution, and business affairs operations, but they will no rely on Warner Brothers global company to try and reduce costs for a company that has struggled in the last couple years. It's the biggest move yet by new Time Warner Chief Executive Jeff Bewkes to slash costs. Time Warner's stock price has remained largely the same since its merger with America Online eight years ago and Bewkes is under pressure to get the gigantic company moving up again. Time Warner also owns CNN, TBS, HBO, cable systems, and publishing operations that include Sports Illustrated, In Style, and Time magazine.

Bewkes said in a statement today, "We are moving quickly to improve our business performance and financial returns. New Line has built a strong franchise of cutting-edge entertainment. We can enhance its value by combining it with Warner Bros. 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. 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. 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."

Richard Greenfield, an analyst with Pali Research, told the Times, "This is a no-brainer move. There's no reason to have two separate infrastructures. The question is why did it take so long for this decision?"

There have been problems at New Line for at least a year, but many expected that a few projects still to come, including Will Ferrell's Semi-Pro, opening tomorrow, could still save the sinking ship. One movie can't be blamed but the relative failure of The Golden Compass a few months ago was a death blow to a studio that saw The Last Mimzy, Code Name: The Cleaner, The Number 23, Shoot 'Em Up, Rendition, Mr. Woodcock, Love in the Time of Cholera, and Martian Child all fall flat in 2007.

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