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After a string of box office flops, news came today that New Line will be merged into its parent company, Time-Warner. New Line started its life turning “Reefer Madness” into a cult hit on college campuses in the 1960’s, made hits of John Waters’ movies in the 1970’s and brought us the “Nightmare on Elm Street” series in the 1980’s, where it finally found its success …

In recent years, New Line has been responsible for the release of major films as “About Schmidt”, “The Notebook”, “Magnolia”, “A History of Violence”, the “Lord of the Rings” films and many more. It’s had its share of flops recently though, including “Over Her Dead Body” and “Mr. Woodcock”.

What this action appears to mean, is that New Line will apparently continue to release edgier, independent films, while Warner will take over the more commercial properties. I guess this means upcoming films like “Sex and the City: The Movie” and “Harold and Kumar Escape from Guantanamo Bay” become Warner output, while films like “Run, Fat Boy, Run”, which seems to have been waiting for release forever, stay New Line.

Bob Shaye and Michael Lynne, co-chairs/CEOs of New Line will be stepping down.

Here’s the press release from Warner Bros:

TIME WARNER CONSOLIDATES FILMED ENTERTAINMENT BUSINESSES
New Line Cinema To Be A Unit Of Warner Bros. Entertainment

NEW YORK, February 28, 2008 – Time Warner Inc. (NYSE: TWX) announced today the consolidation of its filmed entertainment businesses, Warner Bros. Entertainment and New Line Cinema. The combination brings together New Line’s 40-year legacy as the world’s most successful and innovative independent film studio with Warner Bros.’ creative leadership and unparalleled scale and reach in global distribution and marketing.

As part of the consolidation, New Line will be operated as a unit of Warner Bros. New Line will maintain separate development, production, marketing, distribution and business affairs operations, but will closely integrate and coordinate those functions with Warner Bros. to maximize film performance and operating efficiencies, achieve significant cost savings, and improve margins.

In making the announcement, Time Warner’s President and Chief Executive Officer Jeff Bewkes said: “We are moving quickly to improve our business performance and financial returns. New Line has built a strong franchise of cutting-edge entertainment. We can enhance its value by combining it with Warner Bros. Given the trend toward fewer movie releases, New Line and Warner Bros. will now have more complementary release slates, with New Line focusing on genres that have been its strength. 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. We can also take better advantage of digital distribution platforms by combining our studios. These changes will enhance our revenue opportunities and drive dramatic cost efficiencies and higher margins at New Line.”

New Line’s Co-Chairmen and Co-CEOs Robert Shaye and Michael Lynne have elected to leave the studio, but are in discussions about possible future business relationships with the company.

Mr. Bewkes said: “Bob and Michael have a unique partnership that is noteworthy not only for its stability and longevity, but 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 that is home to some of the most popular films in entertainment history, including The Lord of the Rings trilogy, The Mask, Austin Powers, Blade, Rush Hour, Elf, Wedding Crashers and Hairspray. We thank Bob and Michael for their enduring contributions to Time Warner and look forward to a continuing working relationship with them.”

Mr. Shaye and Mr. Lynne said: “New Line has been our respective life’s work as well as our second family. While we’re sad to be leaving, we’re enormously proud to have overseen its extraordinary growth and worked with so many dedicated and talented colleagues. New Line represents innovation, creativity, and independent success. We hope that the company can continue to be a leader in creating entertainment that resonates around the world. We will now focus our efforts on exploring new entrepreneurial opportunities.”

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