End credits roll for Warners specialty units

By Borys Kit and Gregg Goldstein

LOS ANGELES/NEW YORK (Hollywood Reporter) - After Warner Bros. absorbed New Line as an in-house production label in February, industryites wondered which Warners specialty unit would remain, Warner Independent Pictures or Picturehouse. The answer came Thursday: Neither.

In a move that sent ripples of shock around town, Warners said it is was shuttering both divisions, citing cost savings and an elimination of redundant operations.

Most of the units' 70 employees are expected to lose their jobs, including all 43 Picturehouse staffers. WIP president Polly Cohen said that some of her 27 staffers will remain on board to shepherd projects to the studio. The 11-year Warners vet's contract runs for about two more years, and she will stay within Warners for now, though she's unclear in what capacity.

Some Picturehouse staffers also might remain.

The future of Picturehouse president Bob Berney was unclear Thursday, but a close associate said the executive is likely to form his own independent distribution venture, adding, "Bob is a very resourceful guy." No immediate announcement on his plans is expected.

OVERHEAD ISSUES

Warner Bros. president and COO Alan Horn said that in the competitive movie marketplace, which sees upward of 600 movies released each year, profit margins are tough to eke out, and that is exacerbated by overhead. Because New Line is part of Warners, the company is able to handle films across the spectrum of genres and budgets without overlapping production, marketing and distribution infrastructures.

"We can't justify a third overhead," Horn said. "It just doesn't make sense."

Warners did look at various ways it might keep the two companies -- WIP, the art-house film division of Warner Bros., and Picturehouse, the indie movie arm of New Line Cinema. Scenarios that were considered included having Berney and Cohen co-head one specialty division, something the execs agreed to do shortly after the New Line absorption was announced, Cohen said. The idea to merge the divisions arose as early as a year and a half ago, Cohen said, but was nixed at the time by executives at Picturehouse and its partners New Line and HBO.

The decision to cease operations was made only about a week ago, and many inside the company were caught off-guard -- including Cohen, who said she was having meetings about a merged division with Berney as recently as Friday. She said she was informed about the decision Wednesday, and she dismissed word that the decision was made earlier than then. "I doubt they'd pull a whole 'Truman Show' on me," she said with a laugh. "I've been at Warners so long they say derogatory things about me in front of my face."

When Cohen replaced Mark Gill in May 2006, the plan was to develop low-budget genre films at WIP. "You can't live on art-house movies alone," she said.

JUMPING THROUGH HOOPS

"It was similar to what happened at New Line. Warners made both of them (Cohen and Berney) jump through hoops for weeks," says a Berney associate.

"They said, 'Will you streamline your staff?' -- 'OK.' 'Will you use the Warner Bros. distribution network?' -- 'OK.' With every obstacle they threw at them, they came back with a PowerPoint presentation on how to deal with it. It's almost like they wanted Bob to quit."

"Bob wasn't getting a lot of calls from other studios since the New Line announcement was made, but he was getting a lot from people with venture capital," the colleague added. "Now the call volume is getting really crazy."