Warner Bros. shuts down specialty film units

Warner Bros. has discovered a way to deal with the specialty film business — it’s staying away from it.

The flagship studio ended months of speculation Thursday by shuttering both Picturehouse and Warner Independent Pictures. The closings — which caught Hollywood and many inside each division off-guard — will eliminate more than 70 positions over the next few months.

The dramatic exit from the specialty biz continues Time Warner chief exec Jeff Bewkes’ cost-cutting run and underscores the pressure on Warner Bros. to show financial discipline. Most observers expected a consolidation of the two units, with the main question being who would manage the single shop.

“With New Line now a key part of Warner Bros., we’re able to handle films across the entire spectrum of genres and budgets without overlapping production, marketing and distribution infrastructures,” said Alan Horn, Warner’s president and chief operating officer. “After much painstaking analysis, this was a difficult decision to make, but it reflects the reality of a changing marketplace and our need to prudently run our businesses with increased efficiencies.”

Both units will keep enough people employed to handle their remaining handful of releases before finally closing their doors in the fall. Picturehouse has “Mongol” and “Kit Kittredge: An American Girl” in June (with the latter going wide July 2) and “The Women” in September. WIP is due to put out Toronto pickup “Towelhead” in August and “Slumdog Millionaire” in November.

The complete withdrawal of Time Warner from the increasingly dicey specialty game represents a significant moment in filmdom.

The conglom, while still coping with integration angst after the AOL deal, dragged its feet years ago about entering the sector already occupied by affiliates of Sony, News Corp., Disney and Universal. Meanwhile, studio-linked breakouts like “Crouching Tiger, Hidden Dragon” and “Traffic,” on top of true indie smashes like “Blair Witch Project” and “My Big Fat Greek Wedding,” demonstrated both audience appetite and profit potential.

More recent times have seen far-pricier specialty titles such as “Babel” and “Atonement” vie for Oscars and B.O. while costing a comparative fortune to make and market. As the line gets blurrier between studio and specialty fare, still-newer entrants to the derby fueled by outside financing further cluttered the release sked.

Picturehouse topper Bob Berney told Daily Variety that he first heard about the shuttering late Wednesday and noted that Horn and Meyer stressed the move was a matter of philosophy.

“Their decision was not to be in this business,” he said. “It’s not a reflection on me or Picturehouse. It’s not their world.”

Berney has no specific plans for a new job. “A lot of people want to do something — companies, investors. I am confident at the end of the day I will find something, but it needs to be a place that fits,” he said. Berney added that he and several others from Picturehouse will be in Cannes as scheduled. WIP is sending a smaller contingent than originally planned.

One WIP staffer said that before Warners studio boss Jeff Robinov informally briefed the troops Thursday morning, “We all believed they would keep something, some dedicated entity that would handle these films.”

Berney and WIP topper Polly Cohen have both met with Warners brass about the possibility that both will stay on in some capacity.

Rumors had been spreading that Cohen would segue to a job at CBS Films, but its prexy, Amy Baer, denied the move. “I love Polly, but we never had a conversation,” she said.

Asked if she was relieved at seeing two rivals vanishing from the crowded battlefield, Baer said she didn’t view the companies as rivals given the broad-audience pics she aims to launch. Moreover, “It’s good for business when a company succeeds, and it’s bad when one closes. It makes me sad.”

Calls to Cohen and Robinov were referred to Horn, who spoke for the studio Thursday, pointing several times to the move to fold New Line into Warner Bros., eliminating more than 500 New Line jobs.

Horn told Daily Variety that the specialty-unit decision — made in conjunction with Meyer — was “wrenching” from the standpoint of its impact on pinkslipped employees. But he emphasized that it made no sense for Warner Bros. to continue funding marketing and distribution infrastructures at Picturehouse and WIP — particularly since Warner has expanded its capacity to handle films by absorbing New Line’s marketing and distribution operations.

“We concluded that carrying the Picturehouse and WIP infrastructures wasn’t the most economic use of our resources,” he added. “We have the capacity to distribute and market anything.”

Horn said that with some 600 pics now released annually, the specialty biz has become less financially attractive in recent years. He also said that such pics have become more likely to screen at multiplexes rather than arthouse venues and expressed confidence in Warner’s distribution side to ensure that smaller films receive the proper handling.

Horn admitted that the announcement is likely to be interpreted as a Warner Bros. departure from the indie film biz but stressed that it will still acquire and produce specialty pics. He cited successful fare such as “March of the Penguins,” “Before Sunset,” “We Don’t Live Here Anymore,” “La Vie en rose” and “Snow Angels” as examples of the kinds of projects that Warner will still look to buy and produce.

“I’m a card-carrying adult, and I love these movies,” Horn admitted. “But it’s never been a high-margin business.”

Horn also said it’s more likely that the studio will go the acquisitions route. But he also noted that Warners will still look to set up specialty-style products, citing its long relationships with such filmmakers as George Clooney, Steven Soderbergh and Clint Eastwood.

“We’re confident that the spirit of independent filmmaking and the opportunity to find and give a voice to new talent will continue to have a presence at Warner Bros.,” Horn said.

Even before the recent dry spell at the B.O. and Bewkes’ tenure atop the company, there had been confusion at Warner Bros. about which entity would release which film. Pics such as “Letters From Iwo Jima,” which started out on the WIP side of the Warners ledger, or “The Assassination of Jesse James by the Coward Robert Ford” seemed to lend themselves to specialty treatment, and both underperformed when they went out through big Warner.

Several vets of the specialty sector, while somewhat surprised by Warners’ pullout, understood Horn’s analysis while remaining skeptical that Warners or New Line would be likely to embrace the specialty niche any time soon. “They do branded worldwide tentpole day-and-date entertainment; it’s what they do well,” said one exec.

“The specialty business is not like the studios, where if you make 11 movies and 10 don’t work the 11th will cover you,” said Sony Pictures Classics co-prexy Tom Bernard. “Indie labels have to have a lot more success.”

The sector, he added, “seems to be a business of doubles and singles and triples and an occasional home run. It’s very difficult to turn a label into something that is going to be more than that.

“If they didn’t want to have New Line there, then you could see they were consolidating all the labels. They’re basically saying it’s all going to go out through the regular Warner machine. Every other studio has specialty labels, an exploitation label. Warner has one label,” Bernard said.

“They never had a defined business profile, which you need for that business,” said one studio chief.

Picturehouse has 43 employees, WIP 31.

Warner Bros. was the last major to form a specialty label, in 2003. Under former WIP prexy Mark Gill, it generated a few hits, none bigger than 2005 phenom “March of the Penguins.” The nature doc, originally narrated in French, was recut, and new narration was recorded by Morgan Freeman. It went on to gross $77.4 million.

The only other title to crack $10 million was “Good Night, and Good Luck,” the George Clooney vehicle that rode Oscar noms and critical praise to a $31.6 million cume in 2006.

Cohen, a former production exec at the studio, succeeded Gill and inherited his slate. Her acquisitions have included “Introducing the Dwights” and “Snow Angels.” WIP also acquired Paul Haggis’ “In the Valley of Elah,” which earned an Oscar nom for Tommy Lee Jones.

Berney, the Oklahoma-bred former exhib maven, had made his rep by the time Picturehouse was formed in 2005 by handling the releases of a roster of major indie hits, including “The Passion of the Christ,” “My Big Fat Greek Wedding,” “Y tu mama tambien,” “Memento,” “Whale Rider” and “Monster.”

He presided over an uneven run at Picturehouse, partly due to the dual ownership, which ended several months ago, when New Line bought out HBO. He scored biggest with foreign-language pics “La Vie en rose” and “Pan’s Labyrinth,” which took home five Oscars between them.

“A Prairie Home Companion,” Robert Altman’s last pic, also did well for Berney, grossing $20.3 million.

Still, just 11 of the company’s 21 releases exceeded $1 million at the U.S. box office.

Time Warner shares tacked on 1% for the day, closing at $16.15.

(Anne Thompson and Winter Miller contributed to this report.)

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