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Warner Bros

Warner Bros Entertainment

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Warner Bros Entertainment is the division within what is now Warner Media (formerly Time Warner) which houses its substantial film and television production and distribution businesses. In recent years it has been one of the world's most consistently successful movie studios as a result of movie mega-franchises Harry Potter, The Matrix, Lord of the Rings/The Hobbit and Batman/The Dark Knight. As a result, it was the #1 studio by US box office for three consecutive years between 2008 and 2010. It reclaimed that position once again for 2013 and returned to the top spot for 2017 as a result of the huge success of Wonder Woman and sleeper hit It. It has been among the top three every year but one since 2000. The group's equally substantial television production division is responsible for such global successes as Friends, the West Wing and ER as well as more recent hits including The Big Bang Theory and Two & A Half Men. In 2018, Warner Bros became a unit of AT&T, following approval of the latter's proposed acquisition of Time Warner following a court challenge from the Department of Justice.

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Time Warner is a giant in filmed entertainment and has proved a veritable powerhouse in recent years as a result of a string of hit movie franchises. However, its reliance on these film series was emphasized in 2006, when performance fell well below previous years as a result of the shortage of any guaranteed blockbusters. That was the only year since 2000 in which it has not been among the top three studios by US box office. There was an improvement in 2007, helped by the return of Harry Potter, followed by the spectacular success of The Dark Knight in 2008. Harry Potter triumphed once again in 2009 and 2010, along with Inception and Clash of the Titans. Other DC comics adaptations have proved less stellar than the Dark Knight, though Wonder Woman was an unexpected smash in 2017. There are signs that the group is keen to expand its operations in international markets, with moves to establish a video distribution operation in Asia. Warner already has an extensive international global distribution network covering 125 countries, where it distributes its own movies as well as local language features which it has either produced or acquired.

Until recently, Time Warner Filmed Entertainment comprised two separate units, Warner Bros Entertainment and New Line Cinema, as well as various specialist units. New Line was, for example, the studio behind the immensely successful Lord of the Rings movies of the 2000s. However, in 2008, the group announced a structural overhaul in which all the various operating units were combined as one. Warner Bros is the group's main movie production and distribution business. New Line has been retained as a banner for so-called "genre" movies, usually low-budget horror films. Divisional performance has been a little mercurial in recent years, with annual performance dictated by and large by whether or not it contained the benefits from one of the Harry Potter or Dark Knight movies. After three straight years as #1 movie studio by US box office, Warner slipped to second place for the following two years before once again stealing the top slot in 2013. It ranked third in both 2014 and 2015, and #2 in 2016, before regaining the top spot in 2017. It looks set to be the only studio to top US box office of $2bn for 2017. Wonder Woman was the #2 movie in the US that year, while horror movie It was a surprise hit at #5. Both featured among the top ten movies worldwide. Wonder Woman grossed $822m globally, and It $696m. Other successed included DC Comics' Justice League (despite dismal reviews), Kong: Skull Island and the widely acclaimed Dunkirk.

For 2016, Warner's global box office gross came in just under $5.0bn, including $1.90bn in the US. This was underpinned by two releases from the DC Comics franchise and a successful return to the world of JK Rowling's fantastical imagination. Batman v Superman, Fantastic Beasts and Suicide Squad were all among the world's top ten releases by global box office, with takings of $873m, $811m and 746m respectively. The Legend of Tarzan and The Conjuring 2 grossed more than $300m globally, while Central Intelligence and Sully performed strongly in the US market.

It was a more even performance than the previous year, in which the studio's performance was under-pinned by the extraordinary and largely unexpected continuing popularity of American Sniper, released at the end of 2014, with domestic takings in excess of $350m and $548m worldwide. That was enough to put among the studio's top-four movies of all time alongside episodes of the Dark Knight and Harry Potter series. However, only two 2015 releases qualified as breakout hits, disaster movie San Andreas and the Mad Max revival Fury Road. Both were among the top 20 worldwide, with grosses of $474m and $378m respectively.

These successes were offset by several disappointments. Despite respectable box office in the US, Jupiter Ascending's huge production cost meant that it ended up as a loss-maker overall, with an estimated $100m deficit. Pan and The Man from UNCLE were also significant flops. The studio's all-time ranking is still dominated by the Harry Potter, Lord of the Rings/The Hobbit and Dark Knight/DC Comics series. However it also includes American Sniper and original science fiction thriller Inception, a big success in 2010.

Warner Bros also serves as an umbrella for various production partnerships. Wholly owned Castle Rock Entertainment is positioned as a mid-market "independent" film and TV producer. It is best-known for its 1990s hits When Harry Met Sally and A Few Good Men, and the Seinfeld TV series. The group also has several non-equity co-production partnerships. The most significant of these is with Australia's Village Roadshow Group. The partners have co-produced more than 30 movies, including the blockbuster Matrix series. A similar arrangement exists with Legendary Pictures, an independent production company which has co-produced and co-financed the DC Comics adaptations, including Superman Returns, The Dark Knight and 300, as well as The Hangover and Where The Wild Things Are. Another independent, Alcon Entertainment, was responsible for producing The Blind Side and Book of Eli. Warner has a ten-year deal to handle other Alcon projects.

Warner also has a busy television programme-making arm, which has benefited considerably from the fact that it is not directly tied to one of the major broadcast networks. WB Television Studios has been the #1 producer of primetime TV series every year since 2010, making around 75 different shows for all four major TV networks in the 2016/17 season. Current scripted shows included comedy blockbuster The Big Bang Theory, as well as 2 Broke Girls, Mike & Molly, Blindspot, The Flash and Person of Interest. Unscripted shows include The Voice, The Bachelor and The Ellen DeGeneres Show. Other past hits include Westworld and The Leftovers (for sister company HBO), Friends, ER, Smallville, Without A Trace, Gossip Girl, The West Wing and Nip/Tuck among many others.

Warner Bros also manages a huge library of film and television product, comprising some 7,000 movies and 5,000 TV shows. Among other assets, the library includes most of the classic movies made by MGM before 1950, as well as the extensive Warner back-catalogue. Through a partnership with Toshiba, it was one of the main developers of the original DVD home entertainment format. Having originally supported the introduction of Toshiba's follow-up HD DVD format, it broke with its ally in early 2008, transferring allegiance to Sony's Blu-Ray system. Warner Home Video is the US market leader in DVD sales and rentals, with market share of over 20%. In 2005 it was the first studio-owned video marketer to establish a presence in mainland China with the formation of a joint venture with local company China Audio Video. In 2011, Warner Home Entertainment acquired movie review sites Flixster and Rotten Tomatoes. Both were sold on again in 2016 to Fandango, though Warner retains a minority stake.

Until recently Warner also controlled its own TV broadcaster, The WB, a free-to-air mini-network aimed at a teenage or young adult audience and broadcast to a group of affiliate TV stations around the US. In 2006, Warner agreed to combine the business as a joint venture with rival mini-network UPN, controlled by CBS. The merged network launched in September 2006 under new name The CW. The core of its affiliate network is provided by stations owned by Tribune Broadcasting and CBS. Hit shows include America's Next Top Model, Gossip Girl and Everybody Hates Chris.

Also until recently the group co-owned the Warner Village cinema chain in the UK, in partnership with Australian film production and exhibition company Village Roadshow. That business was sold in 2003. However the group still co-owns almost 800 screens in the US, Japan, Italy, Spain, Taiwan and China.

Warner Bros Worldwide Consumer Products is the company's character licensing division, the #2 behind Disney, with estimated retail value of around $6bn annually. Main brands include the Looney Tunes portfolio, Harry Potter, Batman, Superman and Scooby-Doo. DC Comics and MAD magazine also fall within the Warner Bros portfolio.

Warner Bros Interactive Entertainment is responsible for generating games software to tie in with the company's various products. At the end of 2006 the group also acquired a 10% shareholding in games developer SCi Entertainment, producer of the Lara Croft series, and increased that holding to 16% in 2008. In 2007, it took full ownership of another games developer, UK-based TT Games, which has video game development and publishing rights for Guinness World Records and LEGO. A series of other acquisitions have followed including Snowblind Studios and Midway Games, owners of the Mortal Kombat franchise, in 2009; and UK-based Rocksteady Studios in 2010.

The group also owns a collection of other investments in digital properties including video on-demand service DramaFever, specialising in Korean content; digital partnerships with Ellen DeGeneres and LeBron James; and movie streaming service Warner Archive. In 2016 it acquired gaming network Machinimia.

Financials

Warner Bros divisional revenues topped $13.0bn for the first time in 2016, although that represented only a marginal increase over the previous year. Operating income too set a new record, rising 22% to $1.73bn. Despite its size - it is the biggest business by revenues within Time Warner - it remains the least profitable of the group's three main divisions.

In 2016, Warner Bros generated a total of $5.61bn from "theatrical product" ie movies. Of that sum, an impressive $2.2bn came from theatrical rentals, with $1.6bn from TV licensing and just $1.5bn from home video and electronic delivery. Once the biggest contributor to most studios' revenues, home video income has declined steadily year-on-year and electronic delivery has failed to make up for the slide. Television product - ie output from the WB TV Studio - supplied record revenues of $5.82bn, mostly from licensing by broadcast networks. Videogames contributed an additional $1.61bn, down by more than a quarter on the year before.

Revenues for 2017 rose 6% to $13.87bn, with operating income of $1.76bn.

Management

Longtime Warner Bros chairman Barry Meyer relinquished the role of CEO in March 2013 to Kevin Tsujihara, previously president, Warner Bros Home Entertainment Group. The change prompted the departure of the heads of both the pictures and TV production divisions, who had also been considered for the top role. Their combined responsibility was also assumed by Tsujihara. However, an embarrassing leak concerning an extramarital affair in which Tsujihara apparently offered to help his lover get work in movies prompted his resignation in March 2019. In the short term, Tsujihara's role was split between three managers: Warner Bros Pictures president Toby Emmerich, Warner Bros TV president Peter Roth and CFO Kim Williams. Ann Sarnoff was eventually named as chairman & CEO in June 2019.

See Account Assignments for Warner Bros marketing decisionmakers.

History

Born into a Polish-Jewish family which had emigrated to Canada in the late 1880s, the four Warner brothers Albert, Harry, Sam and Jack had tried their hands at numerous odd jobs before setting up a travelling Nickelodeon picture show in 1904. They spent their profits buying up a few small cinemas in Pennsylvania and Virginia, before moving into distribution. In 1917, they bought the rights to a book by the former US ambassador to Germany just as America entered the First War. The movie they produced of the book the following year was a hit, and they finally formed Warner Bros Inc in 1922, securing their future with a series of movies starring one of the first dog stars, Rin Tin Tin. Unable to match the box-office successes of the leading studios, Warners experimented with new technology instead, including the idea of making pictures with sound, an idea dismissed by the majors. In 1927 their first "talkie", The Jazz Singer, created a sensation, propelling the company into the top ranks of movie studios. The brothers moved fast to consolidate their position, acquiring one of the country's biggest cinema chains in 1928, followed in 1929 by First National, one of the biggest studios of the silent era, by then in decline. The latter deal gave Warner control of a large studio lot in Burbank which still forms the core of its operations.

Warners enjoyed a series of big popular hits over the following two decades. These included gangster movies in the 1930s with James Cagney and Edward G Robinson, musicals including 42nd Street and The Gold Diggers of Broadway series, and several successes with Humphrey Bogart in the 1940s including The Maltese Falcon and Casablanca. Other stars contracted to the studio included Bette Davis, Errol Flynn and, from the 1940s, Joan Crawford. In 1944, the studio acquired an independent studio which was churning out a string of animated shorts featuring character such as Bugs Bunny and Daffy Duck. The Looney Tunes cartoon series was to provide Warner with one of its longest-running moneymakers. In the 1950s, Warners and other studios were hit hard, first by government pressure to sell off their hugely profitable cinema chains, and then by the increasing threat from television. Warner was one of the first majors to set up a dedicated division to produce TV shows - including Maverick and 77 Sunset Strip - but slipped into loss in 1958. The pressure led to conflict between the brothers, which came to a peak mid-decade after Jack Warner manoeuvred his siblings out of the business, secretly buying up their shares.

Despite the success of Oscar-winner My Fair Lady in 1964, the studio was acquired by Canadian distributor Seven Arts in 1966, then by Kinney National Service two years later. Kinney was a general conglomerate built up by entrepreneur Stephen Ross, with subsidiaries including DC Comics and Mad Magazine among other diverse businesses. In 1971 Ross spun off his non-media interests as National Kinney Corporation, and grouped the various publishing and entertainment companies as Warner Communications. The group was also bolstered by the acquisition of magazine publisher National Periodical Publications and lens and camera manufacturer Panavision. The film studio scored spectacular successes with The Exorcist and Superman series in the 1970s and early 1980s. In 1976, Warner Communications bought computer games pioneer Atari, which went on to generate spectacular profits for the group in 1981 and 1982, before racking up equally spectacular losses in 1983 and 84. Atari and other diversions were quickly sold off to allow the group to concentrate on its core businesses of movies, music, TV and publishing.

In 1986, both Warner Communications and publishing company Time Inc were among the investors in fast expanding cable and satellite network Turner Broadcasting Systems. To finance his acquisition of MGM/UA's film library, Turner had sold minority shareholdings to more than 30 different cable operators including Time's ATC and what was then Warner Communications. Time and Warner's shared interest in Turner led to more complex negotiations, and finally a full merger in 1989. The deal was very nearly derailed when rival studio Paramount mounted a hostile bid for Time. To protect themselves from predators, Time and Warner took on huge debts of almost $14bn, but these led to massive interest payments which kept the group firmly in the red for most of the 1990s.

By pure chance, Time magazine had also been founded in 1922. In the same year the Warner brothers were setting up their studio in Hollywood, journalists Henry Luce and Briton Hadden were incorporating Time Inc in New York. After leaving Yale University, they had both joined the staff of the Baltimore News. There they came up with the idea of a magazine which summarized the previous week's news. The two 25 year-olds resigned from the newspaper, and spent a year researching and developing the magazine, which finally made its debut on March 3rd 1923. Within just one year, Luce and Hadden had generated 30,000 subscribers. By 1928, revenues had passed $1m. However Hadden contracted a sudden viral infection that winter, and died early in 1929, aged just 31. Luce took over full control of the business, firmly establishing it as the country's foremost news magazine over the following decade.

In 1930, Time Inc spun off its business coverage as separate magazine Fortune; six years later, the company launched glossy picture magazine Life. Other launches included The March of Time (1935) and Architectural Forum (1932). (Competitor magazine Newsweek launched against Time in 1933). The onset of war, and its aftermath, gave the company plenty of work; Time established a worldwide network of freelancers (more than 450 of them by 1958), and ended World War II as one of the largest and wealthiest publishing enterprises in the world. In 1954, Luce indulged his interest in sports with the launch of Sports Illustrated. After suffering a heart attack, he resigned as editor-in-chief of the group in 1964, and died three years later.

Henry Luce's successor Hedley Donovan oversaw a period of rapid expansion as the company launched a books division, Time-Life Books and took an early interest in cable networks. In 1968, the company also acquired Boston book publisher Little, Brown. In 1971, the company traded its own small cable network for a stake in American Television & Communications, and was the controlling shareholder in the first cable-only station, HBO, the following year. In 1978, Time Inc took outright control of ATC.

The company didn't neglect its book and magazine interests either, launching Money in 1972, and the hugely influential People two years later. However, declining sales led to the closure of Life in 1972. The move led to a public outcry for what had become by then a national institution. Time Inc was forced to relaunch Life as a monthly in 1978, before pulling the plug again in 2000 as a result of declining ad pages. (Life was resurrected for a third run in 2004, becoming a free supplement, distributed in Tribune and Knight Ridder newspapers. It closed for the third and possibly last time in 2007). In 1977, the group acquired Book-of-the-Month Club to reinforce Time-Life Books. Further acquisitions followed in the 1980s including Southern Living and Progressive Farmer (1985) and a joint venture to publish Parenting in 1986.

That year, both Time Inc and rival media group Warner Communications were among the investors in fast expanding cable and satellite network Turner Broadcasting Systems. Their shared interest in Turner led to more complex negotiations, and finally full merger in 1989. The deal was very nearly derailed when rival studio Paramount mounted a hostile bid for Time. To protect themselves from predators, Time and Warner took on huge debts of almost $14bn, but these led to massive interest payments which kept the group firmly in the red for most of the 1990s.

The combination of Time and Warner was hardly an obvious match. The differences between the two sides were considerable: one was a sober East Coast Ivy League institution; the other a flashy, even vulgar, West Coast show biz entertainer. But gradually the two sides learned to live with each other, their debt-heavy marriage eventually strengthened by the takeover of Turner Broadcasting Systems in 1996, which provided a bridge between the two extremes and finally pushed the group into profit towards the end of the decade after years of losses. Conflict didn't stop the business from expanding in the meantime. During the first half of the decade, Time Warner acquired and launched a number of magazine ventures, as well as theme park operator Six Flags (sold in 1998 for almost $2bn). Retail operation Warner Bros Studio Stores, a rival to Disney Stores, launched in 1991. The same year, the group debuted cable stations Court TV, Comedy Central and HBO Asia.

In 1993, chairman Steve Ross resigned following a battle with prostate cancer (he died the same year), and after a brief internal power-struggle he was replaced by Gerald Levin. The same year, with interest payments an ever-increasing burden, Time Warner spun off its filmed entertainment and cable interests into a separate company, Time Warner Entertainment (TWE). In a series of complicated deals, it sold small shareholdings in this new entity to Japanese companies Toshiba and Itochu, and a further 25% to telecoms operator USWest, using the cash to reduce its debt mountain. However the relationship with USWest quickly soured. In an attempt to claw back control of TWE, the group swapped its two Japanese partners' shares for holdings in the main Time Warner Inc parent.

The partnership with USWest, subsequently renamed MediaOne, was further strained by Time Warner's announcement that it would acquire all of Turner Broadcasting in 1995. USWest/MediaOne launched a lawsuit, arguing that the Turner business should be acquired by the Time Warner Entertainment entity in which they owned shares, not Time Warner Inc, but the case was quashed. The row was partly offset by an agreement by the two sides to merge Time Warner's high speed internet access network Road Runner with MediaOne Express to create the nation's largest broadband online business, completed in 1998. Microsoft and Compaq each took a 10% stake in Road Runner that year. Time Warner regained management control of Time Warner Entertainment in 1999, after the acquisition of MediaOne by AT&T, although the telecoms giant kept hold of the 25% shareholding. The group also agreed a deal with AT&T to offer local telephone services across Time Warner's cable lines.

AT&T's stake in Time Warner Entertainment went into play in 2002, following the telecoms company's decision to sell its AT&T Broadband division to rival Comcast. In August 2002 the two companies agreed a new restructuring. Time Warner reacquired AT&T's shares for a combination of cash and shares, giving AT&T a 21% stake in a newly restructured Time Warner Cable division. That holding was subsequently transferred to Comcast, following completion of the merger of Comcast and AT&T Broadband.

In 2004, Time Warner joined the bidding to acquire MGM, breaking up long-running negotiations between MGM and Sony. After initially offering a stock-only deal, TW raised its offer to up to $4.6bn in cash in September, but subsequently withdrew its bid in the face of a higher offer from Sony Pictures.

New Line Cinema was until 2008 a separate unit, responsible for breakthrough hit franchises including Austin Powers and the staggeringly successful Lord of the Rings series. Time Warner inherited the business in 1996 as part of the acquisition of Turner Broadcasting, which had acquired New Line in 1993 as a feeder for its movie channels. Then, New Line was best known for "genre" pictures such as John Waters' controversial camp classics with Divine, Bruce Lee imports from Hong Kong and the Nightmare On Elm Street series. Initially, Time Warner considered selling the business, but the emergence of the Austin Powers and Lord Of The Rings franchises allowed New Line's two founders, Michael Lynne and Robert Shaye, to establish a considerable powerbase. The three Rings films together earned well over $3.0bn at the worldwide box office, and around the same amount again in sales of home entertainment and other merchandise. New Line's performance since then has been far less impressive. Wedding Crashers took more than $200m in 2005, but for the following year no New Line release managed to gross even $60m.

In a bid to match the success of Rings, the company's next big project was an adaptation of Philip Pullman's His Dark Materials/Golden Compass series. However the first instalment, released in 2007, failed to catch fire at the US box office, although the company did score with Rush Hour 3 and Hairspray, which took $140m and $120m in the US respectively. Unlike the main Warner Bros business, international distribution of New Line's product was mostly contracted out to third-party distributors. This created a particular problem in the case of The Golden Compass which did far better overseas - where it was handled by other distributors - than in it did in the US. Reflecting New Line's recent disappointing performance, Time Warner's new CEO Jeff Bewkes announced in early 2008 that the studio would be merged into the main Warner Bros business, and that Michael Lynne and Robert Shaye would leave. New Line continues to operate, but in a much reduced form, as a production unit similar to Castle Rock or Legendary.

A few weeks after the absorption of New Line, Warner also announced that it would shutter two separate units specialising in less commercial or "arthouse" releases. The best known of these was Warner Independent Pictures, which scored its biggest hit in 2005 with the US distribution of nature documentary March of the Penguins. George Clooney's Good Night & Good Luck was a more modest success in 2006. New Line had its own speciality unit, Picturehouse . That company, initially a joint venture with Time Warner cable division HBO, was launched in 2005 when New Line recruited Bob Berney, an executive who had previously engineered the astonishing box-office success of Mel Gibson's Passion of the Christ and My Big Fat Greek Wedding, to take control of its existing art-house distribution unit, Fine Line. Picturehouse's biggest critical successes were with La Vie En Rose, the Edith Piaf biopic it distributed in the US, and whose star Marion Cotillard won an Oscar in 2008, and Spanish chiller Pan's Labyrinth. New Line bought out HBO's share of the business at the end of 2007. Although it had been widely expected that Warner Independent Pictures and Picturehouse would merge, Warner took the decision to go one step further in May 2008, pulling out of the arthouse circuit altogether.

Last full revision 18th December 2017

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