MERGER—Clash of Cultures Coming As Giant Invades Studios

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As if following a pair of giant pandas, the nation is watching news about AOL Time Warner to see if the media giants will mate successfully. To some insiders, the Tinseltown-meets-Dulles scenario is anything but a touchy-feely group hug.

“To Hollywood’s creative community, AOL is Darth Vader,” said Bishop Cheen, analyst with First Union Securities Inc. “The veteran of the dot-coms is the evil empire in this case.”

Of course, it’s too early in the game to tell how AOL, led by co-COO Robert Pittman, will play with Time Warner, led by co-COO Richard Parsons.

But the sheer size of AOL and the company’s tendency to carefully bundle its brands under one roof is downright frightening to some producers, directors, writers and actors.

“Everybody on the creative side is concerned about bigness of the corporation,” said Jerry Isenberg, a producer and professor at the USC School of Cinema and Television. “We as an industry are constantly watching the impact of conglomeratization on creativity.”

In fact, most Hollywood creative types are probably more concerned right now about an imminent strike. When that’s over, however, many of them will have to contend with the giant AOL bear stomping through town.

“They don’t make movies. We do. They’re looking at us to continue doing what we’re doing,” insisted Warner Bros. spokeswoman Barbara Brogliatti.

Nonetheless, AOL Time Warner pink-slipped more than 2,000 employees last week in an effort to streamline operations and cut redundancy. And most of those cuts occurred throughout Time Warner’s movie, music and publishing empire.

Warner Bros. motion picture and television operations, at least for the time being, did not lose any employees, but the studio said recently that it is looking to slash as much as $100 million from its annual overhead.

More than 100 jobs were cut at Time Warner’s New Line Cinema and its specialty film arm Fine Line Features. Weeks before the layoffs, New Line’s thirty-something production chief Michael DeLuca was let go.

Analysts say that AOL Time Warner is, as expected, moving aggressively to cut costs in order to meet its goals for revenue and cash flow growth.

“When you have a merger this big, you have many opportunities for what the French refer to as ennui,” Cheen said. “It’s a giant canvas. It’s allowed to have some editing.”

What concerns many in Hollywood is how stifling that editing might be. Ironically, the relatively new, 15-year-old Internet powerhouse is perceived as the enemy establishment to some of Hollywood’s older guard.

“The danger is that the AOL mentality will create a more business-oriented way of making movies,” Isenberg said. “The motion picture business doesn’t stand up to corporate scrutiny very easily. When you’re making a movie, you commit an unknown amount of money to an unknown product that has an unknown audience. To a business person, that’s hard to take.”

History has proven that Tinseltown is a fickle mate. When outside corporate entities have muscled into Hollywood before, tensions flared. Recent pairings Coca-Cola Co. and Columbia Pictures, Matsushita Electric Industrial Co. and Universal Studios Inc., then Seagram Co. and Universal were anything but peaceful.

“The experience in Hollywood with outside entities coming in is that there’s a huge culture clash,” said Tracy Westen, chairman of Grassroots.com and professor of communications law and policy at the USC Annenberg School for Communication. “There’s a little bit of Las Vegas in L.A.’s free-wheeling and risk-taking creative community.”

Still, it’s a business, and the belt-tightening began at Warner Bros. long before the merger talks, according to Brogliatti.

Warner Bros. Chairman Barry Meyer and President Alan Horn have been refocusing the studio on the bottom line since taking the reins in August 1999 from veterans Bob Daly and Terry Semel.

Meyer and Horn declined to comment on the merger.

Under their 19-year reign, Semel and Daly became legendary for their formula of casting huge and costly stars in movies to draw audiences. The formula worked for years and spawned franchises like “Batman” and “Lethal Weapon.” But more recently, their approach produced some huge flops, including “Father’s Day” and “The Postman.”

An increasing emphasis on the bottom line has caused some, like Isenberg, to question the integrity of the motion picture industry.

“It means that movies are going to have less and less to do with quality, and more to do with how I justify to it my boss,” he said.

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