Dialogue: New Line's challenges, successes

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NEW YORK -- It's been a challenging few years for New Line, which had to cope with the illness and protracted absence of founder Robert Shaye and shifts in its parent company, Time Warner, as it tries to capitalize on the success of "The Lord of the Rings" trilogy. But New Line continues to thrive under long-term chairmen and CEOs Shaye and Michael Lynne, maintaining its unique position as a quasi-independent operation within the studio world. On the eve of a gala benefit Friday to celebrate the company's 40th anniversary, The Hollywood Reporter New York senior editor Randee Dawn spoke to Shaye and Lynne.

The Hollywood Reporter: For four decades, you've managed to remain fairly independent despite being a subsidiary of major corporations -- the latest incarnation of which is Time Warner. How have you managed that?

Robert Shaye: I don't think they can figure us out (laughs). Oh, don't write that.

Michael Lynne: You can probably write that (laughs). It's OK. New Line began a long time ago, and there probably aren't any companies in existence today who can say they have had 40 years of constant ownership/management, notwithstanding that technically the ownership has changed. If the key management that had been part of the foundation and the growth of this company wasn't here, it probably wouldn't have been possible.

Shaye: It's all of that. When I say they couldn't figure us out, I don't think they want to.

THR: Will this change once (TW chairman and CEO Richard) Parsons steps down?

Lynne: I don't think that idea is person-centric. Bob and I have a great relationship with Dick, but we have a really similarly strong relationship with (president and COO) Jeff (Bewkes), who ostensibly is the next step in the leadership program, and I don't see that changing.

THR: How do you two split up responsibility within the company, especially since you work and live on different coasts?

Lynne: We spend a lot of the day teleconferencing, so it's more connected than people believe. Although when we started as partners the lines of division were more clear, I think they're way less clear today, if they exist at all. Bob and I share the load equally. But when push comes to shove, really every decision we make that matters we make together.

Shaye: There is a synthesis between what happens on one coast and what happens on the other. There are a lot of decisions that are of lesser importance and have less potential impact that we pretty much rubber-stamp each other, but the big stuff we talk about.

THR: What's the hardest thing about working with a close friend?

Lynne: There's actually nothing hard. That's the easy part. That's why it works.

Shaye: Another reason that it works is that we started out working together and then became close friends, and not the other way around. Going into business with a friend is a problem; becoming friends with a business partner is a much more salutary development.

THR: Have you ever had a major disagreement over a project or direction? How did you resolve it?

Shaye: We resolve it in the following way: "Do what you want to do."

Lynne: I think it comes down to usually whoever feels strongest, and we don't let it come to philosophical blows. And we manage with friendly and business deference to make that work, because it's never come to a place that's a real issue.

THR: Where do you see New Line's next big "Lord of the Rings"-type success story coming from?

Shaye:
You shouldn't look in that direction. Every movie is sui generis. Obviously we have some big-budget tentpole pictures that are ready to be released like "The Golden Compass," or in our development pipeline, but we haven't shifted our business philosophy to start looking for more "Lord of the Rings." That was a once-in-a-lifetime situation, and the only thing we are proud of is that we've shown to the entertainment world and to our colleagues that the company is strong enough and broadly based enough and savvy enough to be able to produce and release three pictures of that magnitude and have the success that they had. If something comes up, we're ready to do it again.

Lynne: It's not a situation you can will to happen. Obviously, there's a financial legacy, but the other legacy is the capability that's been built up in this organization to undertake a project of that scale and to bring it to market in the way that our organization did. That's something that pays dividends for years and years.

THR:
Are you still seeing benefits in terms of revenue from "Lord of the Rings?"

Lynne:
It's one of the most important library pieces any company could have.

THR: So are you looking for more franchise packages? Clearly, "Compass" is a trilogy.

Shaye: It crosses our mind, but I wouldn't say that we're on a big game hunt to find more franchises. That's a dangerous and almost endgame kind of business plan. For a film that costs $150 million, it has to have the prospects to be a really big success just to justify the investment in it.

THR:
A big buzz in film financing has been hedge funds, but you all haven't really dived into that end of the pool yet. Why is that?

Lynne: Not quite a year ago, we did do a deal with (Royal Bank of Scotland), which is in fact putting out approximately 35% of the budgets of essentially two years of our slate, and we're about one-third of the way through that deal. We did feel that they were a very interesting partner for us because they had been in our bank groups before and had not really done this before, and they came to us and said they really wanted to get into this business, and we were the company they wanted to get into business with. So we didn't really go out into the marketplace to generate it; it came to us.

Shaye:
But to clarify, they're not a hedge fund, they're a real bank. This is their investment banking division, but they don't do this as hedging this and shorting that kind of thing. They have a fund of money they generated internally as the fifth-largest bank in the world, I believe, and they decided one of the pieces in their investment portfolio would be an investment like the hedge funds had done with the other Hollywood companies.

THR: So what is your general take on using hedge funds?

Shaye: It's like any kind of insurance policy. It has costs connected with it.

Lynne: And there is, in today's world, or has been, a substantial amount of money from a variety of sources -- it's not just hedge funds -- that are anxious to invest in the film business, and not all of them are deals like the deal we did with RBS. But it's obviously a business that has been attractive for investment and so far has continued to be, and under the circumstances it ought to be a fruitful and smart investment both for the investor and the film company involved.

THR: Bob, you were hospitalized and put in a medically induced coma when you contracted pneumonia brought on by streptococcus A bacteria in 2005. Can you talk about that?

Shaye:
No.

Lynne: It's not recent, anyway.

Shaye: I've said enough. I got very sick, and then I got very better. And that's the story.

THR: Still, considering you're a key executive in an important public company, it was surprising how circumspect everyone was.

Shaye: Well, being the fact that we earned several hundred million dollars for the public company and the stock didn't move one basis point, the fact that one of the senior officers got sick for a while wasn't going to do very much. There was more on an interpersonal basis -- a friendship, and sympathy and support that came from many quarters, certainly from Michael. It was unpleasant, but I got past it.

Lynne: It's now a historical footnote.

THR:
Bob, you've directed a handful of films, the most recent of which was this year's "The Last Mimzy." Will you direct again?

Shaye: I'd like to, if I find a project that I believe satisfies my criteria, which is one that I think audiences will enjoy, that I could make well and be proud of. "Mimzy" was a lot of fun for me personally, but I also took it seriously from a corporate point of view. So the answer is a qualified yes.

Lynne: And Bob was the most efficient producer from a financial point of view that New Line has ever had. He came under budget, and with no complaints.
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