Warner fast-forwards

Execs ousted as studio overhauls DVD, tech arms

In a sweeping realignment, Warner Bros. Entertainment has become the first studio to combine home entertainment, Internet, wireless, games and other digital operations into one group — in the process, ousting homevid topper Jim Cardwell.

The new Warner Bros. Home Entertainment Group will be headed by biz development and strategy exec Kevin Tsujihara. He will report directly to Warners chairman-CEO Barry Meyer and prexy-chief operating officer Alan Horn.

Longtime Warner vid exec Ron Sanders was named to replace 22-year vet Cardwell as president of Warner Home Video, which becomes a division of the larger home entertainment unit. Also out in the reorg is longtime top homevid lieutenant Marsha King.

Cardwell, who replaced Warren Lieberfarb — credited as the driving force behind the launch of DVD — when the latter was unceremoniously ousted at Christmastime in 2002, will remain an adviser to the studio.

Cardwell is said to have ruffled some feathers with his sometimes difficult personality as the company needed him to forge more relationships with partners in areas such as high-def DVD technology. Last week, Warner conceded failed efforts so far to unify the two competing formats and reluctantly agreed to support the rival Blu-ray platform as well as its favored HD-DVD standard.

Perhaps the more significant move is the restructuring of the studio’s portfolio of homevid and emerging technologies, as well as antipiracy efforts, under one umbrella; these activities had previously been scattered across various divisions.

Formation of the new group completes a major realignment of Warner Bros. Entertainment that began this summer with the creation of Warner Bros. Television Group, which put all TV operations under one centralized structure. A main aim of Warners’ new configuration is to ensure various functions operate more seamlessly.

Warner Home Entertainment and Warner Bros. Television stand alongside Warner Bros. Pictures and Warner Bros. Consumer Products.

This summer, Rupert Murdoch’s News Corp. moved to become more aggressive in the digital arena, forming the Fox Interactive Media and announcing high-priced Internet acquisitions.

Within Warner Home Entertainment will be a newly created unit, Warner Bros. Digital Distribution.

“We must safely use our assets across every exhibition outlet available to us today and those developed in the future, while managing windowing structures so as not to cannibalize on those assets and with a constant eye toward protecting them from digital theft,” Meyer said.

In addition to WHV and Warners Digital Distribution, other units in the new Warner Bros. Home Entertainment Group will include Warner Bros. Interactive Entertainment (including Warner Bros. Games), Warner Bros. Technical Operations and Warner Bros. Antipiracy Operations.

Among the biggest specific shifts in strategy: Warner Home Video is taking over distribution of many of the studio’s self-produced videogames. Effort begins next month with a “Friends” interactive game tied to the release of the series’ 10th season on DVD and continues with Warner franchises such as a Justice League game and a Dirty Harry videogame that will likely be released in 2007 at the same time as a boxed DVD set of the movies, Tsujihara said.

The studio will likely also cut back licensing with partners such as Electronic Arts on vidgame titles such as “Batman” as those deals expire, though Tsujihara said the studio will continue with third-party licenses on many titles.

“We’ll be merging our sales and marketing into the video group,” he said. “The same retailers of DVDs — Wal-Mart, Best Buy and Target — represent the lion’s share of vidgame sales as well.”

“The way audiences access our content is changing every day,” Horn said. “We know that people aren’t just sitting on the couch and watching TV anymore.

“As content providers, it is absolutely in our best interest to responsibly meet consumer demand for our product across as many of these exhibition platforms as possible,” he continued. “The formation of the Home Entertainment Group is a strategic move to keep Warner Bros.’ product front, center and easily accessible to consumers.”

Tsujihara said the studio had been thinking about this kind of reorg for more than a year but intensified the effort over the last six months with the rapid increase of new digital products and services including high-def DVD, the video iPod and wireless services.

“The reorg was to make the company speak with one voice around digital,” he said.

The creation of the digital distribution unit allows the studio to take activities that had been in several different divisions and “create scale and speak with expertise within those areas,” Tsujihara added. “We needed to create a group that is nimble and can manage windows and product availability within all those areas” — wireless, VOD, online, etc.

Pay-per-view and video-on-demand move from the homevid unit, where they were structured under Lieberfarb in his final two years, into the new digital distribution unit, which will also include subscription VOD, electronic sell-through and Jim Noonan’s Warner Bros. Online and Wireless division. Tsujihara previously had corporate oversight of WB Online.

The head of Warner Bros. Digital Distribution will be announced shortly.

Studio plans to increase its production of original and franchise gaming properties under the leadership of Jason Hall, senior VP of Warner Bros. Interactive Entertainment, who will also continue to work with Warner Bros. Consumer Products.

Other division heads now under the new group include Chris Cookson, president of technical operations; Darcy Antonellis, senior VP, antipiracy operations; and Dean Marks, senior VP, intellectual property. They are tasked with creating and evaluating new technologies, digital rights management applications and digital safeguards for securely delivering content across all current emerging distribution platforms.

Tsujihara, who joined the studio in 1994 to assist in the management of the company’s interest in Six Flags, is promoted from exec VP, corporate business development and strategy.

Though the movie studio and vid unit are each tops in market share, Warner finds itself under increasing pressure to deliver stronger profits from parent Time Warner, which itself is under fire by Carl Icahn as the result of its long underperforming stock.

“The challenge of growth is hard,” Tsujihara said. “It’s hard to grow when you’re No. 1.”

Of Tsujihara, Meyer said, “Kevin is a visionary executive, well versed in future-based technologies, and the ideal person to help us navigate the uncharted territories we’ll face with emerging and next-generation distribution and exhibition platforms.”

Sanders, who began his career at Procter & Gamble, joined WHV in 1991 and was most recently exec VP-general manager, North America. He assumes responsibility for the overall worldwide operation of WHV.

“Ron is good for morale and team-building across the company,” said Tsujihara. “He’s very approachable and has a global sense of the needs of the business.”

Under Cardwell, WHV had the top overall homevid market share at nearly 20% ($4.8 billion) in 2004 and more than 20% ($4.5 billion) in 2003; it has a dominant position this year with about 20% ($3.5 billion) through the first week of October, according to Daily Variety sister publication DVD Exclusive.

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