New Line's run as an autonomous production, marketing and distribution entity came to an end today as Time Warner announced that going forward the studio would operate as a slimmed down unit of Warner Bros and that New Line's co-chairmen and co-CEOs Robert Shaye and Michael Lynne were leaving the company.

The move follows months of speculation following the relatively poor performance of New Line's films since the Lord Of The Rings trilogy. New Line will now 'focus on genres that have been its strength' - ie horror, comedy and urban films like its Nightmare On Elm Street and House Party franchises. Even though it will maintain separate development, production, marketing, distribution and business affairs operations, it will be a severely reduced operation and hundreds of redundancies are expected.

New Line will from now on retain international rights, which will be handled through Warner Bros Pictures International's existing infrastructure. A pioneer in the international sales business, New Line has shared its successes with independent output partners such as Entertainment in the UK, Metropolitan in France and Alliance in Canada. Those arrangements will presumably come to an end in the near future and their disappearence changes the face of the international sales market.

Official word from Time Warner headquarters said New Line would 'closely integrate and coordinate those functions with Warner Bros to maximise film performance and operating efficiencies, achieve significant cost savings, and improve margins.' There was no word yet on the anticipated number of lay-offs or when New Line would stop distributing movies outside Warner Bros.

New Line has a strong theatrical lineup this year including Sex And The City, Journey-3D, He's Just Not That Into You, The Time Traveler's Wife, Inkheart and Four Christmases. Will Ferrell comedy Semi-Pro opens this weekend.

Also unclear is the fate of Picturehouse, the specialised distribution company which was formed by New Line and HBO under Bob Berney. Picturehouse has enjoyed Oscar winning hits such as Pan's Labyrinth and La Vie En Rose, but its future is now bound to that of Warner specialised label Warner Independent Pictures.

'We are moving quickly to improve our business performance and financial returns,' Time Warner's president and chief executive officer Jeff Bewkes said. '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.

'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.'

Bewkes paid tribute to Shaye and Lynne and hinted at a possible future working relationship with Time Warner. '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.

'New Line has been our respective life's work as well as our second family,' Shaye and Lynne said. '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.'

In an internal memo sent out to New Line staff, Shaye and Lynne said: 'This is, of course, a very difficult and emotional time for all of us who have worked at New Line.'

They continued: '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.'

Meanwhile they hinted that they would set up their own company. '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,' said the memo.