Gerry Rich to lead merged marketing dept.

Paramount is folding the marketing, distribution and physical production departments of Paramount Vantage into the larger studio. Three people will be laid off.

Move comes on the heels of other recent developments that prove specialty labels are feeling the economic pinch. Time Warner turned New Line Cinema into a production label in April, laying off 450 staffers, and then in May shuttered Warner Independent Pictures and Picturehouse.

Vantage’s merged marketing department will be led by worldwide marketing prexy Gerry Rich. Vantage execs Megan Colligan and Josh Greenstein landed promotions as co-presidents of domestic marketing, reporting to Rich.

The consolidated distribution department will be led by Jim Tharp, president of domestic theatrical distribution, and the combined physical production department will be headed by Georgia Kacandes, executive vice president of physical production, who will report to Paramount Films production prexy Brad Weston.

Vantage, which was launched by ex-agent John Lesher with much fanfare at the 2006 Cannes Film Festival, will continue to be run as a production label under the direction of prexy Nick Meyer. Lesher took on the title of Paramount Film Group prexy in January, while his prestigious slate of films — Sean Penn’s “Into the Wild,” and two co-productions with Miramax, “There Will be Blood” and “No Country for Old Men”– were in the midst of Oscar campaigns. Lesher also shepherded “An Inconvenient Truth” and “Babel” through the Oscars. Meyer, who came over as co-prexy from Lionsgate in 2006, took over the sole presidency of Vantage.

The cost of producing, marketing and distribution of specialty films has skyrocketed as so-called “indie” divisions come under increased scrutiny from corporate parents.

“The new consolidated structure allows both Paramount and Paramount Vantage to leverage the strengths and resources of a combined talent base, while minimizing redundancies and optimizing efficiencies,” said Rob Moore, vice chairman of Paramount Pictures.

“Today’s change is in line with our strategy to restructure the business for the long term,” added Lesher. “It takes into account the dynamic nature of the marketplace and positions Paramount for the future.”

The new marketing operation will service Paramount Pictures, Paramount Vantage, DreamWorks Pictures, MTV Films and Nickelodeon Movies, as well as distribution partners Marvel and DreamWorks Animation.

Lesher put Vantage on the map with a slate of movies driven by such high-profile stars and filmmakers as Angelina Jolie, Daniel Day-Lewis, Nicole Kidman, Tommy Lee Jones, the Coen brothers and former client Paul Thomas Anderson. But he learned how easily money flows out the door — and how slowly it trickles back in — in a brutally competitive crowded niche market.

Lesher threw marketing cash at “Babel” and “An Inconvenient Truth” to establish the label. But two Paramount holdovers — Craig Brewer’s exploitation pic “Black Snake Moan” and National Geographic’s “Arctic Tale” — stumbled at the box office, as did Mike White’s quirky Molly Shannon comedy “Year of the Dog.”

But Vantage’s biggest misfire was Lesher’s $14 million passion project “A Mighty Heart,” starring Jolie as Mariane Pearl, wife of the murdered Wall Street Journal reporter. Domestic gross was only $9 million. Other disappointments stacked up such as “Margot at the Wedding” and Sundance pickups “Son of Rambow” — which cost $7 million — and “How She Move.”

In early 2006, Lesher brought in Meyer as his co-president, a veteran of Sony Pictures Classics and Lionsgate Intl., who offered a complementary skill set in global business affairs and distribution.

Meyer launched a foreign sales operation and closed a sought-after deal with the fledgling Overture Films to sell and release their projects overseas. Three greenlit Overture titles are already in the pipeline. The two companies are co-producing Michael Moore’s upcoming follow-up to “Fahrenheit 9/11,” which sold quickly at Cannes.

Vantage’s 2008 slate includesEd Zwick’s Nazi fighter drama “Defiance,” “How She Move,” “Son of Rambow,” “The Foot Fist Way,” Sundance pickup “American Teen,” “The Duchess” and Sam Mendes’ “Revolutionary Road.”

Vantage’s first-look deal with Will Ferrell and Adam McKay will be moved over to the Paramount Pictures.

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