New Line Cinema, Inc.

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New Line Cinema, Inc.

888 7th Avenue
New York, New York 10106
U.S.A.
Telephone: (212) 649-4900
Fax: (212) 649-4966
Web site:http://www.newline.com

Wholly Owned Subsidiary of AOL Time Warner Inc
.Incorporated: 1967
NAIC: 512110 Motion Picture and Video Production; 512120 Motion Picture and Video Distribution; 512220 Integrated Record Production/Distribution

New Line Cinema, Inc. is a leading producer and distributor of films. The company made its reputation producing horror films and other low-budget niche movies. Its early hits were the Nightmare on Elm Street movies of the 1980s. Later, as a subsidiary of Turner Broadcasting and then as a subsidiary of entertainment conglomerate AOL Time Warner, the company has produced films that rival major studio releases for production and advertising budgets. New Line operates a subsidiary company, Fine Line Features, which produces films for an art house audience. The company has a television arm, New Line Television, and a music division, New Line Music. New Line International Releasing coordinates publicity and marketing for New Line films overseas, where the company does substantial business.

Exploiting a College Niche: 1960s-70s

New Line Cinema began as a distribution company that showed films on college campuses. The company was founded by Robert Shaye in 1967. Shaye was born in 1940, the son of a wholesale grocer. Shaye first got behind a movie camera when he was 15, producing a training film for his father’s grocery. He attended the University of Michigan, where he earned a bachelor’s degree in business. He eventually earned a law degree from Columbia University in New York, and then traveled to Sweden on a Fulbright scholarship to study copyright law. But he remained interested in film, and made an award-winning movie before he was 25. Living in lower Manhattan in the mid-1960s, Shaye found a way to combine his interest in movies with his legal training. He was invited to a viewing of a film called Reefer Madness, a quasi-documentary film made in the 1930s dramatizing the evils of marijuana. The film, made as a serious anti-drug vehicle, came off as howlingly funny to the drug-tolerant youth of the 1960s. Shaye had a hunch Reefer Madness would be a hit at college campuses across the country. In addition, he knew that the film’s copyright protection had expired, meaning that he could legally show it for his own profit. Shaye founded New Line Cinema with an initial investment of only $1,000. Its corporate address was Shaye’s Manhattan apartment, a scruffy fifth-floor walkup. The gamble paid off. Reefer Madness was a hit, and Shaye’s company eventually made $2 million off distributing the film.

New Line Cinema continued distributing films to campuses through the 1970s. Shaye picked films that appealed to a college audience and were somewhat outside the mainstream of popular culture. New Line brought John Waters’s bombastic creation Pink Flamingos to campus audiences, along with the horror film Night of the Living Dead. New Line also distributed foreign films that had a limited mainstream audience, such as the 1977 French film Madame Rosa, and the 1978 French-Belgian Get Out Your Handkerchiefs. Both these films won Academy Awards for Best Foreign Film. Yet the film distribution business was up and down for New Line, with Shaye constantly casting about for the next hit. In the early 1980s, Shaye decided to produce films as well as distribute.

Rising to a New Level with Freddy: 1980s

New Line had distributed George Romero’s Night of the Living Dead, a low-budget 1968 film that became a classic in the horror genre. Thus the company had an understanding of horror’s appeal to its core youth audience, as well as an idea of what could be done with just a couple million dollars for production. Robert Shaye was on the lookout for a film his company could produce, wanting more control over his product than he had just by distributing. In 1982 he got hold of the script to Nightmare on Elm Street, written by Wes Craven. Craven had previously directed two horror films known for their goriness, Last House on the Left, and The Hills Have Eyes, as well as other low-budget movies for big screen and for television. Shaye liked the script, and paid $14,000 for it. New Line produced the movie, spending less than $2 million to make it. Nightmare on Elm Street came out in 1984, and was an instant hit. The film brought in more than $26 million. New Line quickly followed up with an Elm Street sequel in 1985. This one too was made on a limited budget, $2.5 million. It went over even better than the original, and grossed $30 million.

New Line’s success in the 1980s was closely tied to the popularity of the Nightmare on Elm Street movies, of which there were six. The company promoted the films with personal appearances by actor Robert Englund, who played the burned and disfigured killer Freddy Krueger. Each succeeding film drew a large audience. The fourth in the series, the 1989 Dream Master grossed around $50 million in its first six months. By 1991, the combined Elm Street films had brought in some $500 million in worldwide sales. Even though New Line seemed to have an unstoppable product in the Elm Street series, the company did not deviate from its early financial strictness. The movies were all made for under $6 million. New Line timed the release of its films carefully, so that they did not compete with the major studios’ big releases. Though a new Elm Street film in the late 1980s was bound to have a big opening because of its loyal following, New Line typically debuted during a dull time, such as at the end of summer, when no blockbusters were around to distract from it.

New Line Cinema went public in 1986, made newly visible by the first two Elm Street movies. Its revenues were $26.5 million that year. The company also branched into television. It produced Freddy’s Nightmares with Lorimar Telepictures. The show was hosted by actor Englund, though New Line was careful to monitor how much the Freddy character appeared on the show, so as not to dilute his popularity. The arrangement with Lorimar meant that company took the financial risk, and New Line and Lorimar split the profits from syndication of the series.

New Line had more than Freddy Krueger in its arsenal. The company bought the rights to the 1974 horror film The Texas Chainsaw Massacre for $75,000 and in 1986 put out a sequel, The Texas Chainsaw Massacre 2. This was followed by the 1990 film Leatherface: Texas Chainsaw Massacre III. These were, like the Elm Street films, produced on a relatively low budget and geared towards a youthful audience. The company also produced other movies similar to what it distributed in the 1970s to college campuses. New Line produced Torch Song Trilogy in 1988. This was a movie by Harvey Fierstein, based on his Broadway play about a drag queen. New Line managed to keep production costs for this film down to only about $5 million. Other films the company produced were equally lowbudget, and an eclectic mix. New Line produced children’s films, such as Babar: The Movie and Suburban Commandos, assorted horror films, and softer movies such as Torch Song Trilogy that looked for an art house audience.

Transformation in the Early 1990s

The company had a huge mass-market hit in 1990 with its release of Teenage Mutant Ninja Turtles. The movie, based on a comic and television show about four pizza-loving warrior turtles, was a must-see for children worldwide, and it became the highest grossing film ever for an independent studio. New Line’s revenue rocketed up to approximately $150 million, and the company began investing in other entertainment ventures. In 1991, New Line bought a 20 percent share in RHI Entertainment Inc., a company that made television miniseries and made for-TV movies. RHI brought with it a library of films that could be syndicated. New Line wanted a bigger toehold in the fastgrowing television movie market, and was also looking to syndicate shows in Europe. Also in 1991, New Line acquired a company called Nelson Entertainment Group. The deal gave New Line home video and foreign rights to a substantial collection of films, some 600 in all. As part of the arrangement, New Line also became a backer of filmmaker Rob Reiner. The company signed on to back Reiner’s next 11 films, for 17.5 percent of the profits.

New Line had become a more powerful company in the early 1990s. It had a worldwide distribution arm, a television and home video business, and its own singular brand of new movies. In 1993 the company caught the eye of media mogul Ted Turner. Turner owned a string of leading cable television companies, including CNN, TNT, and the Cartoon Network. His Turner Broadcasting System (TBS) announced in August 1993 that it was buying New Line for over $500 million. The acquisition also brought TBS another film production company, Castle Rock Entertainment.

Company Perspectives:

New Line Cinema is one of the largest independent producers, acquirers, and distributors of theatrical motion pictures in the world. Founded in 1967, today the studio has a domestic marketing and distribution organization; a home video division; a television production and distribution organization; an international division; and merchandising, music and new media subsidiaries that fully exploit New Line ’s film properties and franchises. New Line ’s programming refreshes AOL Time Warner’s libraries and provides valuable programming for its cable networks, in particular TNT, TBS and HBO.

A Bigger Player in the Late 1990s and After

New Line became a unit of Turner Broadcasting in 1994. The company began working on a slightly bigger scale, spending more to develop and promote its films. But it was still a small studio compared to such established Hollywood giants as Warner Brothers. The company had revenues of $400 million in 1994. It stayed with films for a youthful audience, such as its 1994 The Mask, taken from a comic book and starring Jim Carrey. This film had conventional marketing, including tie-ins with McDonald’s, and merchandising deals with a toy maker and a video game producer. New Line also made less splashy films in the mid-1990s, and tried promoting them in unusual ways. For its 1995 My Family, a film about a Mexican American family, New Line advertised on Latino television stations and displayed posters in Mexican groceries. For another 1995 release, Friday, the film’s musical stars attended street fairs in several cities. New Line’s budgets for its films were still relatively low, yet it did splurge on occasion. In 1995 the company’s development arm paid $4 million for the script for The Long Kiss Good Night, nearly setting a record.

In 1996, New Line’s parent company, Turner Broadcasting, was acquired by the media conglomerate Time Warner Inc. for over $7 billion. Time Warner quickly dissolved Turner’s film unit, Turner Pictures, into its Warner Brothers studio. Next it announced that it was considering selling New Line Cinema. Though a host of investors were named as interested, the sale did not go through. New Line continued to put out its signature mix of films, with some successes and some flops. It did well with the critically acclaimed Boogie Nights in 1997, a movie about the rise and fall of a male porn star. A mass-market hit was the 1997 Austin Powers, International Man of Mystery. This spy spoof quickly earned over $55 million, and New Line licensed a slew of tie-in merchandise to capitalize on its popularity. This was followed by a sequel in 1999, which made over $200 million in the domestic market. Other mid-1990s films did not fare so well for New Line. It had a string of flops, including The Long Kiss Good Night, which the studio had paid so dearly for. In addition, New Line began spending significantly more to make movies. Though it had built its reputation for films made for under $10 million, by the mid-1990s, it was spending closer to $50 million for some films, close to what larger studios lavished on their product. This meant that even films which did well at the box office did not recoup as much. New Line spent $45 million to make The Cell in 1999, and it grossed around $60 million. Financially, this movie was only a modest success. Then in 2000, New Line spent $80 million for a film starring actor Adam Sandler, Little Nicky. The company spent another $35 million on marketing, and the poorly received movie grossed only around $45 million.

In 2000, New Line’s parent, Time Warner, merged with America Online, forming the new mega-media company AOL Time Warner. Under terms of the new deal, New Line’s top brass no longer reported to Ted Turner, as they had ever since he bought the company in 1994. They became responsible instead to the president of Time Warner, Richard Parsons. Time Warner had earlier wanted to jettison New Line, and now its finances seemed to come under increasing suspicion. In an article in the Los Angeles Times (December 1, 2000), New Line President Michael Lynne admitted that “as a general rule, New Line has had its greatest success with pictures in the $30-million to $40-million range that have made a lot of money.” He declared the company’s focus would remain on genre films made for under $15 million, as well as mainstream films in the $25 million to $50 million range. New Line protected itself from significant loss by pre-selling foreign rights to its movies. Nevertheless, it was clear that New Line had deviated from this general rule several times recently. Not only had Little Nicky cost $80 million, but a mainstream comedy, Town & Country, originally budgeted for $55 million, ended up costing closer to $90 million.

In January 2001, New Line lost 100 employees as part of a trim dictated by new parent AOL Time Warner. Several months later the company underwent a management restructuring. Michael Lynne became co-chairman and co-CEO along with founder Robert Shaye, the production manager was replaced, and the company’s divisions streamlined. As 2001 drew to a close, AOL Time Warner’s top management made several announcements in the press concerning their excitement about Warner Brother’s upcoming release of Harry Potter and the Sorcerer’s Stone. This was almost guaranteed to be a whopping success, since it was based on the new titan of children’s literature, J.K. Rowling’s book of the same name. At the same time, New Line was preparing to release its most expensive and undoubtedly riskiest film yet, the first of three movies based on J.R.R. Tolkien’s Lord of the Rings. The studio, which had prided itself on its low budget successes, had gambled $270 million to make the three films back-to-back. The danger of course was that if the first film flopped, the second two were bound to be duds. New Line had committed to the films in 1998, before the AOL Time Warner merger, and it had been Robert Shaye’s suggestion to the director that they make all three. It seemed rather ominous that AOL Time Warner’s chief operating officer had not thought to tout the films, favoring Harry Potter in his press interviews. But New Line had worked assiduously to offset its financial risk. It had gotten major distributors to pay up some $160 million in advance for Lord of the Rings, and it worked with a worldwide marketing and distribution network to coordinate the release country by country. The movie spawned over 40 licensed products, and New Line entered joint marketing deals with major corporations such as Barnes & Noble, Burger King, and General Mills. New Line had a lot riding on the success of Lord of the Rings. Fortunately the film opened to a wave of critical and public acclaim in December 2001. The next two films in the trilogy were due to be released in December 2002 and December 2003, respectively. The company seemed to have at least these two hits lined up, and so for the short term had proven its worth to its new parent.

Principal Subsidiaries

New Line Music; Fine Line Features.

Principal Divisions

New Line Home Video; New Line Television; New Line Theatrical Distribution; New Line International Releasing.

Key Dates:

1967:: Company is founded by Robert Shaye in New York, with a $1,000 initial investment.
1984:: New Line releases first Nightmare on Elm Street movie.
1986:: Company goes public.
1994:: New Line is acquired by Turner Broadcasting System.
1996:: Turner Broadcasting is acquired by Time Warner.
2000:: Time Warner merges with America Online to form AOL Time Warner.
2001:: New Line releases first of three epic Lord of the Rings movies.