Warners axes Picturehouse, WIP

Seventy employees expected to lose jobs

After Warner Bros. absorbed New Line as an in-house production label, industryites wondered which Warners specialty unit would be kept, 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 redundancies.

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 exec is likely to form his own independent distribution venture, adding, "Bob is a very resourceful guy." No immediate announcement on his plans is expected.

Warner Bros. president and COO Alan Horn said that in the competitive movie marketplace, which sees upward of 600 movies being 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 entire 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 permutations of keeping the companies in discussion, including 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 initial idea to merge the divisions came as early as a year and a half ago, Cohen said, but was nixed at the time by execs 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, part of the original plan was to develop low-budget genre films at WIP. "You can't live on art house movies alone," she said.

"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."

Picturehouse already had success in the arena with "Pan's Labyrinth," and Cohen was about to ramp up her genre slate, but the decision to have the absorbed New Line handle those films took the option away. "Bob felt strongly he wanted to do those genre movies," Cohen said. And despite his willingness to co-head a new division, this may have been a contributing factor to its demise.

Warners will release WIP and Picturehouse's movies up until the fall. Titles on the Picturehouse side include "Mongol" (June 6), "Kit Kittredge: An American Girl" (in limited release June 20 and wide release July 2) and "The Women" (Sept. 12). Warner Independent's upcoming releases include "Towelhead" (Aug, 8) and "Slumdog Millionaire" (in limited release starting Nov. 7). Picturehouse will remain open until Oct. 1, but just when its employees will be laid off remains unclear. At least some WIP staffers will remain through the "Slumdog" release.

Cohen said her division has about 30 projects in development, some preceding her tenure. Her immediate efforts will be finding them homes within the studio or elsewhere, she said.

Picturehouse, a division driven by acquisitions and negative pickups, has only around 10 or fewer projects in development that will be seeking homes.

What raises concerns around town is that the industry is losing two buyers and distributors. And with Warners now being the only company without a specialty division, many execs and sellers were saying that the company is leaving the indie and festival film business.

"It's all about the tentpole movies; everything else is an afterthought," said one manager, whose feelings were reverberated around town.

Horn, however, made it a point of saying that the company is not leaving that part of the biz.

"We will still go to festivals. We are not abandoning that marketplace," Horn said, adding the specialty fare "will not be relegated to New Line." New Line, he said, will not be a "genre factory" but will help supplement Warners' slate making any kind of film it wants, subject to a final greenlight by Horn.

He said criticism that Warners does not know how to handle smaller releases no longer applies to a company that released awards material such "Million Dollar Baby" and "Michael Clayton."

"In the last four or five years, we have gained greater expertise in the handling of these movies," Horn said. "We have the people in place to sell any movie."

Still, selling a movie that has Clint Eastwood or George Clooney's name attached to it is one thing, it's another to sell one like "Juno."

"This was inevitable. (WIP) was always an awkward fit within Warners," said former WIP chief Gill, now running production shingle the Film Department. "It's a sad day. Nobody expected that both companies would survive, but it's a shame that both are gone."

The other reality is that other than a few hits such as Picturehouse's "Pan's Labyrinth" and WIP's "March of the Penguins," most releases from these divisions -- about 30 from WIP and about 20 from Picturehouse -- were little-seen bombs.

WIP's "Snow Angels," David Gordon Green's drama starring Kate Beckinsale, grossed barely $370 000 at the domestic boxoffice. Picturehouse's Simon Pegg comedy "Run Fatboy Run" couldn't reach the $6 million mark.

Berney flew to London on Thursday for his traditional stopover vacation on his way to Cannes and will be at the fest with three of his execs. As of last week, he was discussing a potential project with NPR star Ira Glass and will be scouting more in France but not making any purchases. Cohen said she wasn't sure if she would be visiting Cannes but said some staffers likely will attend.

"I'm just concerned with making the cocktail fundraiser I'm co-hosting tonight," she said.

Berney did not offer any details of his plans but, sounding very much like an obituary, said, "We've had a very exciting and successful run at Picturehouse, and I am so proud of the team and the filmmakers we've worked with."

Borys Kit reported from Los Angeles; Gregg Goldstein reported from New York.