Asked how hopeful he was of returning to New Zealand to play Gandalf in The Hobbit, Sir Ian was tactful.

"Oh, I think that's a question for another occasion but I'm seeing Fran and Peter Jackson this evening and no doubt we will talk about that and other matters.
"But I have no news for you."

and ...

But it seems relations may be thawing - the director himself is still keen, and so is the wizard.
"I'm a generally optimistic person," says Sir Ian.

As it turns out, Schwartz's departure is just one of many wrenching changes sweeping through the studio. Though New Line made a big fuss celebrating its 40th anniversary this year, the studio has been mired in a horrific slump. The real question facing New Line, with the contracts of its co-chairmen Shaye and Michael Lynne up next September, is whether the studio can be turned around in time to save it.

Relations have been rocky with parent company Time Warner, which many people believe is eager to turn New Line into a less autonomous production entity if Shaye and Lynne depart.

If there is any good news here, it's that the studio is trying to reinvent its entire filmmaking process. "We've had a couple of bad years and it's very hard to figure out -- is it the films or is it the marketing?" says the famously blunt Shaye. "It felt like a disservice to everyone to just patch things up. I wanted someone with a fresh approach. It's exciting to me that Chris is from another medium -- he won't have the 'same old, same old' attitude. When you're in a rut, your job is to lift yourself out, which is something we're trying to do on the production side too."

Eager to move ahead with "The Hobbit," New Line has quietly been trying to mend fences with "Rings" filmmaker Peter Jackson, who has sued the company over his share of profits from the first "Rings" films. When asked if it was true that company insiders had been in talks with Jackson's reps, Shaye replied, "Yes, that's a fair statement. Notwithstanding our personal quarrels, I really respect and admire Peter and would love for him to be creatively involved in some way in 'The Hobbit.' "

Moving ahead with "The Hobbit" would tie in to another pivotal New Line issue: In an era when Hollywood is deluged with equity money, will Shaye and Lynne make a run at buying back New Line from Time Warner? Shaye's response was worthy of a U.N. diplomat: "We have not expressed that point of view publicly. And if we ever do, [Time Warner chiefs] Dick Parsons and Jeff Bewkes would be the first to know about it."

A lot is riding on whether New Line can reinvigorate itself. It's often the company on the skids that is most willing to take the kind of daring risk that can turn everything around. Staking the company's future on "Lord of the Rings" was one of the great long-shot gambles in Hollywood history. The real question about New Line is: Can lightning strike twice?

... We have also said that we do not want to tie settlement of the lawsuit to making a film of The Hobbit. In other words, we would have to agree to make The Hobbit as a condition of New Line settling our lawsuit. In our minds this is not the right reason to make a film and if a film of The Hobbit went ahead on this basis, it would be doomed. Deciding to make a movie should come from the heart - it's not a matter of business convenience. When you agree to make a film, you're taking on a massive commitment and you need to be driven by an absolute passion to want to get the story on screen. It's that passion, and passion alone, that gives the movie its imagination and heart. To us it is not a cold-blooded business decision.

... our Manager Ken Kamins got a call from the co-president of New Line Cinema, Michael Lynne, who in essence told Ken that the way to settle the lawsuit was to get a commitment from us to make the Hobbit, because "that's how these things are done". Michael Lynne said we would stand to make much more money if we tied the lawsuit and the movie deal together and this may well be true, but it's still the worst reason in the world to agree to make a film.

here are Nikky Finks article/s on this which is like a runnong timeline commentary ...

http://www.deadlinehollywooddaily.com/...ms-new-line-changes/
Posted by Nikki Finke on Wednesday, Feb 6th, 2008 at 09:03AM

Quote

It seems that there are rumours surrounding renewing contracts and a change for New Line.
It will be interesting to see what happens ...

I'll have a think and post back, but I think I am still keeping with my previous post on the thread.

I made comment on the movie board yesterday, in a What Say You Thread Del Toror will Direct The Hobbit ... regarding investors, investments in the Hobbit, and what the expectations are - especially on the new of Del Toro directing (unconfirmed as yet) and how we could be very well monitered for the responses ... not just here of course ... but also regarding projecting finances and what sort of income the Hobbit may generate ... I wonder how much the Hobbit is worth in a fire sale ... I'd say it would keep it value pretty well ...
Somehow these all seem intrinsicslly tied in ....

Maybe New Linewill be split in some way and is one of MGMs new Movie franchises? ... MGM waits for no one!! LOL!!

anyway, just an ongoing update as to matters :D

Cheers
Elven

---

The Shire was never the same after
Barbra Cartland moved into Bagshot Row.


Tolkien was a Capricorn!
The Hobbit!!
Its a Happening Thing!!
Russell Crowe for Beorn

Sauruman: "Do know how the fan girls/boys first came into being? ... they were Tolkien scholars once ... Taken by the Dark Director, tempted to hold moots & dress up like Hobbits, Elves, Dwarves and Wizards ... A ruined & terrible form of life, not to mentions bad grades ... and now perfected at TORN ...
Whom do you serve!"

The trust that manages the estate of J.R.R. Tolkein’s “Lord of the Rings” trilogy and intellectual property sued New Line Cinema, the Hollywood studio that obtained the rights to produce films based upon his works.
The trust slams New Line, alleging that it’s been “engag[ing] in the infamous practice of ‘Hollywood accounting’ by using various ‘bookkeeping’ devices to delay paying Tolkien’s trust.
The suit claims that:

“The three hugely successful films based on J.R.R. Tolkien’s beloved “Lord of the Rings” trilogy have grossed nearly $6 billion. Despite these record-setting revenues (amounts derived ultimately from Professor Tolkien’s classic fantasy novels....[New Line] has paid nothing to Tolkien’s successors with respect to their contractually-mandated participation in the gross revenues of the films.

* * *...n spite of the Film’s unprecedented financial success, platiniffs have not received a single penny of their contracted share of the gross receipts earned from the Films.” (emphases in original)

The trustees claim that they haven’t been the only financial victims of this scenario, disclosing that director Peter Jackson’s production company also sued New Line over the studio’s alleged “failure to properly account and pay to Jackson his appropriate profit participation in the films.”
According to the lawsuit, a series of agreements made in1969 granted United Artists the right to make films based on Tolkien’s works in exchange for paying the Trusts’s predecessors-in-interest “a total of 7.5% of the ‘Gross Receipts’ from any films based upon” Tolkien’s works, “after a contractually-defined ‘Artificial Payment Level’ [wa]s reached.” New Line subsequently acquired those rights.
The suit seeks more than $150 million in damages from New Line for breach of contract; the right to terminate the studio’s rights to make more films based on Tolkien’s works, reformation of the original 1969 contract; punitive damages, an accounting, and related relief.

1. For compensatory damages in eccess of $150 million dollars;

2. For punative damages in an amount which, considering New Lines enormous worldwide wealth and income, is sufficient to punish New Line , to set an example and deter further such wrongful behaviour;

3. For a declaration that plaintiffs are entitled to terminate and cancel all future rights of New Line under the 1969 Agreements, including without limitation New Line's right to produce, distribute, and/or exploit future films based upon the Trilogy and/or the Films, as well as all rights to produce, distribute and/or exploit films based on The Hobbit, and without predjudice to the plaintiffs right to recover damages or to any other right or remedy of plaintiffs;

4. For a declaration that plaintiffs are entitled to receive 7.5% of the Gross Receipts (after the Artificial Payment Levy is reached) as to any films based upon Professor Tolkiens four literary works;

5. In the alternative, to the extent that the Court were to adopt any meaning of the 1969 Agreements contrary to the contentions of plaintiffs, that the 1969 Agreements be reformed to provide the meaning represented by New Lines predecessor-in-interest and understod by plaintiffs and their predecessors-in-interest and/or the intent of the parties to the 1969 Agreement;
6. For an accounting between defendants and plaintiffs;
7. For payments over to plaintiffs of the amount due from defendants as a result of the accounting;
8. For imposition of a constructive trust over all monies due and owing to plaintiffs, and any benefits and income derived therefrom by New Line;

9. For intrest at the maximum legal rate; and

10. for costs of suit and such other and further relief as the courts shall deem proper.

The colorful 40-year run of New Line is coming to an abrupt end, costing the jobs of most of the company's 600 staffers.
The company -- home to "The Lord of the Rings," "Austin Powers," "Friday the 13th," "A Nightmare on Elm Street," "Rush Hour," "The Mask" and "Boogie Nights" -- will be folded into Warner Bros. as a small genre arm.
But toppers Bob Shaye, who founded the company in his New York apartment, and Michael Lynne will not be part of the package.
No exact numbers have been divulged for how many of New Line's staffers will stay but the surviving entity will be a shell of its former self, refocusing on the horror, comedy and urban genre pics that helped put it on the map decades ago. Employees will attend meetings today in Los Angeles and New York to discuss future plans.
Time Warner said New Line would continue to have development, marketing, business affairs and some distribution operations but those will be cut severely. And New Line films will go out through Warner Bros. pipes after this weekend's "Semi-Pro."
Warner will likely make ample use of completed New Line pics since the usually prolific studio has dated only three pics for 2009.
New Line production prexy Toby Emmerich and distribution-marketing topper Rolf Mittweg are staying on for the time being and will report to Alan Horn and Barry Meyer. It's anticipated Emmerich will segue into a producing deal and be succeeded by chief operating officer Richard Brener.
The fate of Time Warner's specialty film divisions, Picturehouse and Warner Independent Pictures, wasn't addressed Thursday, but New Line's oversight of Picturehouse signals that the operations will also be consolidated.
Picturehouse prexy Bob Berney had no comment.
Time Warner CEO and president Jeff Bewkes wouldn't address other operations, but told Daily Variety the consolidation is "a move toward the label model," adding, "New Line will have its own voice, but focus on a smaller slate and franchises they have built. The main operation, the arms and legs, will be at Warner Bros." More than one option

• (Co) Daily Variety Filmography, Year, Role
• (Co) Daily Variety

Thursday's announcement -- a few minutes after the closing bell of the New York Stock Exchange -- was not a complete surprise in the wake of Bewkes' first earnings call as TW chief on Feb. 6. Citing an industry shift toward fewer releases, he said cutbacks at New Line would be central to a plan to save $50 million annually.
Bewkes is under pressure to improve results companywide and budge a stagnant stock. He said New Line will stop its longstanding practice of selling off international rights to finance films as many of its output deals are due to expire.
"With the growing importance of international revenues, it makes sense for New Line to retain its international film rights and to exploit them through Warner Bros.' global distribution infrastructure," he added.
That switch was likely hastened by New Line's selling off foreign rights to the pricey "The Golden Compass," only to see it underperform domestically while delivering abroad. Final domestic cume was $70 million, while international gross has topped $260 million.
In a message to New Line staffers, Shaye and Lynne warned New Line will be much smaller.
"This was a painful decision, because we love New Line, and the people who work here have been like our second families," Shaye and Lynne said. "But we will be leaving the company with enormous pride in what all of us at New Line have accomplished together. From its humble beginnings 40 years ago, our studio has created some of the most popular and successful movies of all time."
The curtain fell just four years after "The Lord of the Rings: The Return of the King" vaulted New Line to the pinnacle of the film biz. The third installment of the ultra-risky $270 million trilogy won the best picture Oscar and grossed $1.1 billion worldwide.
The three films together were a cultural event and the stuff of movie lore, bringing in billions in B.O. and merchandise. Rejected by other studios, Peter Jackson found a home for his JRR Tolkien obsession at New Line, which rolled the dice on an 18-month shoot in New Zealand by a helmer with no prior studio hits.
Since then, however, New Line had fallen on harder times. Its lone breakout post-"Rings" pic was "Wedding Crashers," which tallied $209 million in summer 2005. Its only solid performers since were "Rush Hour 3" and "Hairspray."
With the absence of hits came grim headlines. Shaye waged an expensive -- and ultimately unsuccessful -- legal fight against Jackson over gross receipts from the "Rings" pics. He also quarreled with favorite son Brett Ratner over back-end deals for "Rush Hour 3," an on-and-off project that finally came out last summer. And Shaye opted to take time out from running the company to direct "The Last Mimzy," a bland kidpic that grossed just $21.5 million last year.
In a major exec shift last year, New Line promoted Brener in a move seen as a signal that Brener might be Emmerich's eventual successor. Dominating its slate are mid-priced comedies such as "Harold and Kumar Escape From Guantanamo"; "Sex and the City"; "He's Just Not That Into You" with Drew Barrymore, Jennifer Aniston and Jennifer Connolly; "The Ghosts of Girlfriends Past" with Matthew McConaughey and Jennifer Garner; and "Four Christmases" with Vince Vaughn and Reese Witherspoon.
The significant non-comedies on the upcoming slate: "Journey to the Center of the Earth 3D," kid fantasy "Inkheart" and "Time Travelers Wife," with Rachel McAdams. Plans to release the year's films are at press time full steam ahead. Picturehouse titles include "Run Fat Boy Run," "Kitt Kittredge," with Abigail Breslin and "The Women," with Meg Ryan, Annette Bening, Jada Pinkett Smith, and Debra Messing.
A key New Line property, "The Hobbit," was stalled for years due to the court battle between Shaye and Jackson -- even though it represented a logical franchise extension of "The Lord of the Rings." Partly at the behest of MGM topper Harry Sloan (who owned half of "The Hobbit" rights and would not go forward unless Jackson was involved creatively), Shaye and Lynne buried the hatched with Jackson by settling the lawsuit a few months ago.
"The Hobbit" has Guillermo Del Toro in talks to direct, and the picture will be unaffected by the ouster of Shaye and Lynne. Though the films won't be scripted until a director is hired, and Jackson wraps "The Lovely Bones," the expectation is that the films will be ready for release for Christmas 2011 and 2012. Harry Potter will have wound down at WB by then, and the corporation will surely welcome another fantasy franchise that has an eager global audience waiting. New Line will distribute domestically, while MGM has international rights.
Thursday's announcement didn't address the fate of New Line's TV, homevid and legit operations.
On the small screen, New Line TV has seen mixed results, earning praise for scripted fare like Fox's "Kitchen Confidential," but mostly sticking with reality entries. In March, WE: Womens Entertainment is slated to bow "High School Confidential," a documentary series about 14 teenage girls as they navigate high school; TV Land is on board this July with "Family Foreman," which focuses on the life of George Foreman and his family.
New Line has a separate marketing and sales operation for home entertainment; Warner has long handled physical distribution of DVDs.
New Line originally trafficked in a checkered mix of auteur films like Godard's "Sympathy for the Devil" and midnight movies like "Reefer Madness" and early John Waters fare. After years of hand-to-mouth existence, the company reached a new level of stability thanks to the 1980s homevid boom and the startling $25.5 million take from slasher pic "Nightmare on Elm Street" in 1984.
Having survived brushes with insolvency, the company became expert at serving the teen and twentysomething aud, pioneering the use of street teams and campus screenings. After "Nightmare" came profitable franchises like "House Party," "Friday," "Blade," "Austin Powers" and "Rush Hour."
With its newfound success came two acquisitions -- one by Ted Turner, the other by Time Warner -- that made Shaye a billionaire.
The company's current woes mirror the time just before "Rings" hit the jackpot. Emboldened by its great run in the 1990s under wunderkind production chief Michael De Luca, New Line made profligate choices with Adam Sandler's "Little Nicky" and Warren Beatty starrer "Town & Country."
(Winter Miller in New York and Pamela McClintock, Michael Fleming and Michael Schneider in Hollywood contributed to this report.) More than one option

• (Person) Michael Fleming Actor, Animator, Book as Source Material
• (Person) Michael Fleming Rerecording
• (Person) Michael Fleming Props

'Wrenching" ... how subtle ....how does 'Destruction' sound? I think New Line is in a bad way and the foundations are starting to shift, if not crumble. NL might be restructured from the ground up ... as I said once before ... heads are going to roll - it all depends which ones, and I tthink other will jump ship - but it sounds as if its already happening ... and Time Warner and the owners of the Axe as I see it ... though I feel its a rather untrustworthy situation. What does it mean for the Hobbit if Shaye's contract is not renewed? I wondered who has the option of renewal? Him, New Line or its something that has to be negotiated evenly ...What about an early retirement for him ... or at least bowing out gracefully, then to take up other options like either starting another company or buying New Line (if TW sold or cut it up)

Wonder what the shares are worth at the current market downturn - I wonder how this effects new productions, salaries and projects? and how much money will be available soon - I wonder if there will be budget considerations as to which movies to invest with ...

Is New Line ripe to buy out? It would be if it was in a mess - Im sure they could get it for a good price if its on the skids. Run the company that you chair into the ground ... make this close to the time you are about to bow out ... buy it ... have your first production as the Hobbit ... and clean up ...
If New Line change hands, Im sure having a lawsuit still hanging over their head (on sale) drops the price and changes the playing field a bit ... Im not Lawyer, but I wonder if this is relevant?

I reckon Shaye/Lynne might divorce themselves from New Line - buy it at the Fire Sale - reorganise it, - and then partner up to buy New Line back - especially if it was cut up. (Good if Pete had some form of compensation)

On the surface of this almost polite complaint - I get the feeling that this is has huge ramifications to New Line. It could be there ending, whether it be self imposed, or forced to the point of restructuring. Warners seem to be heading New Line in that direction anyway, but looking at that situation now, with this new lawsuit (after Jacksons lawsuit) in the first progressive stages, I think things have been rushed to get the Hobbit underway, or at least announced, and the idea to fold New Line under the wings of Time Warner ... I wonder how this will be executed with all this going on ... it seems to have almost hastened New Lines demise and not prevented it from remaining independent. I’d be doing some head rolling (or retiring) just to get some of this out of the way. With this hanging overhead, it may have delayed such actions as well. You might have to cancel that long awaited holiday Bob ...

Hi all. A friendly spy friend of mine who happens to work somewhere within the bowels of Time Warner just forwarded me an e-mail the whole company just received from TW president Jeff Bewkes letting them know that New Line will in fact be folded into Warner.

I've cut and pasted the body of the e-mail below for your inspection ...

Quote

This afternoon, we announced that New Line will be operated as a unit of Warner Bros. New Line will continue to retain its own brand identity and will maintain separate development, production, marketing, distribution, and business affairs operations, but it will now coordinate those functions with Warner Bros.

The combination should strengthen our company’s filmed entertainment business by combining New Line with Warner Bros.’ industry-leading position and global reach. New Line has a proud 40-year legacy of producing creative, cutting-edge entertainment. That will continue. But, given trends in the industry toward fewer movie releases, the importance of a coordinated strategy for the international and digital distribution of filmed entertainment, and the need to continue to make sure that we’re running our businesses as efficiently as possible, it made sense for us to combine our studios’ infrastructures.

Bob Shaye and Michael Lynne, the Co-Chairs and Co-CEOs of New Line, have chosen to leave the company, but we’re in discussions about possible future business relationships. Bob and Michael have a unique partnership that is noteworthy not only for its longevity, but also for its record of innovation and success. They have guided New Line’s growth from a privately-held art film distributor to the world’s leading independent film studio – home to such popular films as The Lord of the Rings trilogy, The Mask, Austin Powers, Blade, Rush Hour, Elf, Wedding Crashers and Hairspray. I thank Bob and Michael for their enduring contributions to Time Warner and look forward to working with them in the future.

This consolidation will also result in changes, including the elimination of jobs at New Line. Warner Bros. is currently working through the details and will let people know how the changes affect them as soon as possible. Colleagues whose jobs are eliminated will be treated fairly and respectfully. These are very difficult decisions, but they’re important for the future success of our film studios and our company.

As always, thank you for your hard work and support as our company moves forward. I’ll continue to keep you updated on our progress.

I think this move has alot to do with the lawsuit - and things may have not been as such, if it didnt come about.

This all comes as no surprise. Warner has taken in New Line to protect what New Line already has, and with that responsibility, I think it includes the lawsuit as well – that just doesn’t go away. Though it complicates things as I see it, mainly towards hold-ups, and re-routing the lawsuit to accommodate any new changes with New Lines structure into Warners. And yes, I think the Tolkien Estates legal team got in before this all happened – knowing that changes were going to be made, maybe not knowing exactly what those changes were, but waiting for the decision for Peters suit to be finalized, with some decision made, before they could proceed.
The lawsuit defendants aren’t just New Line. There is Katja as well, New Lines accounting arm, and presently, depending on the courts decisions, those that were accountable at Katja are yet to be named. Theres a process in itself.
For the Tolkien team to feel compensated completely and be returned what is due, there will need to be some form of audit. The TE are asking for much more than 150 million – much much more. There is a request for compensation to deter NL from doing this again, interest on whats owed at the end of the day after the audit, plus court costs. That alot! The 150 million is just a benchmark to start the proceedings and can be adjusted to suit the absolute figures. And just 6 billion in receipted figures? No, I think its more – alot more.
It maybe suitable for New Line to be under the banner of Warners, presently, but that may be to bring confidence relating to ‘The 1969 Agreements’ if there are question about the integrity and the ability of any further of Tolkiens works being used. ... if the Courts decide to enable the TE to ‘up-date’ them (The Agreements), and bring them into line, without taking them from New Line, they maybe transferred over to Warners in some way. Yet New Line contest the Agreements as they are isn’t helping to smooth that process. In a round about way, It is New Line who are saying that the Agreements are in their favour over the TT, and so to get that sorted and in their favour for a 2.5% decidion on the TT to go to NL, the Agreements have to contested. It is part of NL strategy.
Maybe if NL concede that they were wrong and do owe 7.5% instead of 2.5%, it may help, but it also will need the books to be opened to readjust any figures.
If the Courts allow this to be looked into, then there is an audit – and after the way that NL has already been caught out with FOTR accounting, its hard to say that the TE are out of line asking for these requests – such as the money, and to strip NL of any further and future association with production, and distribution, and exploitation of not only the Hobbit, but LOTR as well.

So the move which see’s Lynne and Shaye’s contracts not being renewed at this time, is no surprise either. That’s been on the cards for a while. I’m also concerned that Warners move to downsize, and make redundant NL staff is also a complication that holds things up with the lawsuit and the Hobbit, unless the Courts don’t favour the TE requests for a decision to be made – which I think on some points is highly unlikely. Warners need the Hobbit, and New Line, at this stage still have it in their stable.

We could say that none of this is relevant to the Hobbit, but throughout the past couple of years, it has all been relevant and time consuming. But this strategy by Warner regarding New Line I think seems to streamline things somewhat. I think the Hobbit ‘Movie’ process has started, otherwise Peter and Fran would not have announced their positions on the matter – so things are moving – are that was a strategic move by New Line to keep the Hobbit in their stable before its ’lease’ ran out and converted back to Zaentz. And the Tolkien Estate knew of the Hobbit outlines (fully scripted or not) or at least saw the Hobbit as greenlit in some way.

At this stage I think the Lawsuit will go ahead, with some adjustment, as what’s just happened with New Line and Warners has changed things momentarily, but there might be another way to proceed with it. I bet the lawyers are earning their pay at the moment. It wouldn’t surprise me if some offer was laid on the table from one party to the other (NL to the TE), but I cant see this being reasonable nor sensible for the TE to take – they have a pretty keen resolution to get their way, and I think if one over-rode the other, its about the change to the Agreements which is in their best interests to persue.

As for Shaye and Lynne, I dont think its out of the question that they could start something else up, or move to Cuba for an extended holiday ... where did Ronnie Biggs go for all that time? Brazil?

Cheers Elven x

February 28, 2008
To: New Line Colleagues
From: Bob Shaye and Michael Lynne
Subject: Our Company
This afternoon, Time Warner is announcing that New Line will become a unit of Warner Bros. This is, of course, a very difficult and emotional time for all of us who have worked at New Line. While there is not much we can say that can lessen the impact of this announcement, we did want you to know about the decision before you read about it in the press.
New Line will maintain its own identity and will continue to produce, market, and distribute movies. But New Line will now do so as part of Warner Bros. and will probably be a much smaller operation than in the past. Time Warner hopes that operating New Line as a unit of Warner Bros. will allow New Line to focus on the creative side of movie-making, while reducing costs and taking advantage of Warner Bros.' distribution systems. The company will be holding group meeting with New Line employees tomorrow in Los Angeles and New York to discuss this announcement, and is committed to letting employees know as soon as possible about how this change affects them individually.
For our part, we will be stepping down as Co-Chairmen and Co-CEOS of New Line. This was a painful decision, because we love New Line and the people who work here have been like our second families. But we will be leaving the company with enormous pride in what all of us at New Line have accomplished together. From its humble beginnings 40 years ago, our studio has created some of the most popular and successful movies of all time. Those movies are a tribute to the amazing creative energy and entrepreneurial abilities of the talented people at New Line. They are a legacy that will endure forever.
Although we are stepping out of New Line, we intend to remain actively involved in the industry in an entrepreneurial capacity, and will keep you advised of developments.
We thank all of you who have worked so hard to make New Line such a success. We are very proud of every one of you.
Bob & Michael

For our part, we will be stepping down as Co-Chairmen and Co-CEOS of New Line. This was a painful decision, because we love New Line and the people who work here have been like our second families.

EXCLUSIVE: I'm told that New Line Cinema founders Bob Shaye and Michael Lynne are meeting with Jeff Bewkes this week to talk about their contracts which expire this year. Sources say it's virtually certain that the studio pair will be shown the door. I hear this isn't coming as a surprise to Shaye or Lynne, either: they're expecting the new Time Warner chief to end their tenure at the studio they founded in 1967, sold to Ted Turner's Turner Broadcasting System in 1994, and brought under Time Warner's control in 1996 ......

In a conference call with analysts today, CEO Jeff Bewkes said Time Warner plans companywide cost cuts and specifically mentioned that its New Line Cinema movie studio is ripe for expense reductions. News reports said Bewkes stated that changes in the film industry leave less purpose for New Line. I reported last month that sources told me New Line co-founders Bob Shaye's and Michael Lynne's contracts wouldn't be renewed by Bewkes and that the studio would either be folded into Warner Bros or sold altogether to someone like Terry Semel. My latest info is that when Bewkes met with the New Line pair to deliver the bad news, the twosome pushed back and told Bewkes they would put together a plan for reorganization that would save the company a lot of money in exchange for a contract extension that leaves them as co-heads of the studio. But Bewkes isn't interested in that scenario.

Bob Shaye and Michael Lynne, the Co-Chairs and Co-CEOs of New Line, have chosen to leave the company, but we’re in discussions about possible future business relationships.....

I thank Bob and Michael for their enduring contributions to Time Warner and look forward to working with them in the future.

New Line will maintain its own identity and will continue to produce, market, and distribute movies. But New Line will now do so as part of Warner Bros. and will probably be a much smaller operation than in the past. Time Warner hopes that operating New Line as a unit of Warner Bros. will allow New Line to focus on the creative side of movie-making, while reducing costs and taking advantage of Warner Bros.' distribution systems.