Warner Bros Entertainment : advertising & marketing profile : page 2

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History of Warner Bros

Free for all users | see full profile for current activities: 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. See full profile for current activities


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