Bewkes outlines TW initiatives

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UPDATED 6:27 p.m. PT Feb. 6
CORRECTED 5:55 p.m. PT Feb. 7

New Line's status as a full-fledged studio under the Time Warner umbrella is under review, new Time Warner CEO Jeffrey Bewkes said Wednesday, as he gave Wall Street his first assessment of what the media conglomerate could look like in the future.

AOL, Time Warner Cable and the TW corporate offices also are in for a revamp, Bewkes said during his first earnings conference call since taking the reins of the conglomerate.

The news came on the day that TW reported mixed fourth-quarter financials and projected slower 2008 growth.

Bewkes unveiled a review of New Line's operations that could leave the studio as a label housed within Warner Bros. and without its own distribution system.

His comments on New Line were the first formal signals from the top that TW is rethinking its approach to film operations. Although the restructuring could lead to the departure of co-chairmen Michael Lynne and Bob Shaye -- each of whom is in the final year of his five-year contract -- sources at Warners insisted that they are working with Bewkes to address New Line's future.

Bewkes said his team is "evaluating whether it still makes sense to operate two separate (studio structures)" at a time when the importance of international boxoffice is rising and studios make fewer releases. Hinting that he doesn't want to sell New Line, though, he said he wants to operate New Line "more efficiently."

Bewkes also said he sees "real value" in New Line as an independent label and brand.

When Lynne and Shaye founded the brashly indie New Line in 1967, they focused on genre fare like "The Nightmare on Elm Street" series and offbeat movies from such directors as John Waters. Acquired by Turner Broadcasting System in 1994, New Line became part of TW in 1966 when TW absorbed TBS.

Although never abandoning its genre roots, New Line gradually took on more ambitious projects, hitting pay dirt with such franchises as the "Austin Powers" movies and "Rush Hour" series. The three "Lord of the Rings" movies, released between 2001 and 2003, resulted in a boxoffice bonanza and Oscar glory.

But New Line hasn't maintained that momentum. Although it scored two $100 million-plus hits in 2007 with "Hairspray" and "Rush Hour 3," most of its lineup failed to ignite and its pricey "Golden Compass," though a hit abroad, fell flat in the U.S.

While New Line has a full, domestic distribution operation, it releases its films abroad through foreign distributors. If New Line were downgraded to a Warners label, Warners might be hard-pressed to handle a full complement of New Line titles through its domestic pipeline: Last year, Warners released 24 films, while New Line distributed 13. But TW may well decide it wants to feed New Line's product through Warners' international distribution apparatus, given the rising boxoffice tide throughout the world.

On other fronts, Bewkes also discussed a split of AOL's online advertising and audience business from its Web access business; a restructuring of TW's 84% stake in TW Cable; and more than $50 million in annual corporate cost cuts in an initial round of cuts.

While Bewkes gave few specifics on many of his restructuring initiatives, Wall Street apparently enjoyed some unusual candor and sent TW shares 2% higher to $15.71. TWC is "substantially undervalued," Bewkes argued.

In terms of running TW's businesses better, he said the firm -- and most in the industry overall -- needs to be "a bit more revolutionary than evolutionary" in digital initiatives. TW predicted adjusted OIBDA would grow 7%-9% this year, which could exceed Wall Street's average forecast of 7% but would fall well below the 17% recorded in 2007.

The fourth-quarter profit of $1 billion included special items and marked a decline from the $1.7 billion recorded a year ago, which was boosted by a gain. OIBDA increased 16% to $3.5 billion thanks to growth in film and publishing and at TWC and AOL. Revenue rose 2% to $12.6 billion.

Quarterly film OIBDA jumped 46% to $350 million as revenue rose 13% to $3.5 billion helped by the success of "I Am Legend."

Gregg Kilday in Los Angeles contributed to this report.
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