Warner Bros. unveils a slate of superhero films after poor summer

Staff Writer

Oct. 16, 2014 5 AM PT

Warner Bros. has unveiled a slate of superhero films that the big Hollywood studio believes will help drive profit after it suffered through an uncharacteristically poor summer.

The studio plans to release 10 films from its DC Entertainment imprint, including at least two that feature both Superman and Batman, starting in 2016. Warner Bros. also intends to make three movies based on a book by J.K. Rowling, whose “Harry Potter” series was the biggest franchise in the Burbank studio’s history.

The ambitious strategy comes at a crucial time for Warner Bros., which told Wall Street investors Wednesday that it planned to cut its annual overhead by $200 million and is set to embark on a major round of layoffs. There have been some reports that the company, a unit of Time Warner Inc., could eliminate about 1,000 jobs.

The studio’s strategy reflects the realities of a business that’s been buffeted by change.

Hollywood just suffered through its worst summer at the box office since 1997 after adjusting for inflation, and there’s been an overall retrenchment in an economically challenged movie business. Consumers are going to the multiplex less, drawn to increasingly rich television offerings, among other diversions.

Warner Bros. isn’t immune. It released a handful of duds over the summer, including “Blended” and “Jersey Boys,” and now finds itself in unfamiliar territory: third place in domestic box-office share. The studio has finished No. 1 or No. 2 in nine of the last 10 years.

Chief Executive Kevin Tsujihara said at a Time Warner investors meeting in New York that his studio had a “tough summer.” But he signaled to Wall Street that the studio will deliver financially.

“We are firmly committed to improving our margins,” Tsujihara said. “Through that process we have committed to cutting costs significantly.”

The studio is betting big on franchise movies, which, while often expensive to produce, have the benefit of being known quantities for audiences and can pay major dividends at the box office. Last year, eight of the top 10 grossing films in the U.S. and Canada were sequels or projects tied to well-known intellectual property.

Among Warner Bros.’ forthcoming films from DC Entertainment are “Batman v. Superman: Dawn of Justice” (slated for 2016), “Wonder Woman” (2017) and “Green Lantern” (2020). The movies will put Warner Bros. in even deeper competition with Walt Disney Co.’s Marvel Studios, the company behind recent hits including “Guardians of the Galaxy” and “Captain America: The Winter Soldier.”

“DC will be a key engine for growth across Warner Bros.” Tsujihara said.

The studio also announced three Lego-branded pictures that would be released between 2016 and 2018.

Entertainment industry analyst Harold Vogel said the strategy reflects “the reality for every studio.”

“This is more or less what you’d expect them to say,” Vogel said. “It’s nice to hear — but the devil is always in the details.”

Warner Bros., which has about 8,000 employees, is set to begin cutting jobs by early November. The reductions are expected to affect all divisions of the film and TV studio at offices around the world. Tsujihara did not disclose the number of jobs that would be eliminated, and Warner Bros. declined to comment.

Warner Bros. isn’t the only studio to announce a major cost-cutting initiative in the last year or so. In November 2013, Sony Pictures Entertainment said at a meeting with investors that it was cutting $250 million from its budget. Since then, Sony Pictures, a unit of Tokyo-based Sony Corp., has gone through several rounds of layoffs.

Tsujihara said the cost-cutting initiative and the company’s forthcoming film slate would help Warner Bros. generate “high-single-digit growth in adjusted operating income.”

For Warner Bros.’ fiscal 2013, the company posted operating income of $1.32 billion and revenue of $12.31 billion. That was an improvement from 2012, when the company had operating income of $1.23 billion and revenue of $12.02 billion.

Demosthenes Vardiabasis, an economics professor at Pepperdine University’s Graziadio School of Business and Management, said that “focusing on franchise movies is a good strategy,” particularly because such films are popular in growing Asian countries such as China, now the second-biggest movie market behind the U.S.

“Warner Bros. is trying to become more efficient,” Vardiabasis said.

The studio had a surprise hit this year with “The Lego Movie” and will also look to build on the popularity of the blockbuster, which took in $468 million worldwide. The studio’s Lego film plans include releasing “Ninjago” in 2016, “The Lego Batman Movie” in 2017 and “The Lego Movie 2” in 2018.

There will also be the re-teaming with “Harry Potter” author Rowling to adapt a single 42-page book into a series of hoped-for hits. Warner Bros. released eight films in the lucrative “Harry Potter” movie franchise, which racked up $7.7 billion in worldwide box office. The new films would be inspired by “Fantastic Beasts and Where to Find Them,” a fictional Hogwarts textbook that Rowling wrote in 2001 to accompany her “Potter” novels.

Moving forward, Tsujihara said, the studio would release between 22 and 24 films annually. But the prospect of an increased number of those films being superhero pictures, sequels and spinoffs is troubling to some observers.

Wheeler Winston Dixon, a film studies professor at the University of Nebraska-Lincoln, said that although Warner Bros.’ strategy makes sense “from a business point of view,” it is “a form of artistic cowardice.”

“This is a strategy that will keep the lights on,” he said. “But on the other hand, it is further proof of the death of cinema as an art form.”

The Wednesday event, which was hosted by Time Warner Chief Executive Jeff Bewkes, included presentations from the heads of each of the company’s major divisions. Bewkes and his team made a case for Time Warner’s business strategy in the wake of 21st Century Fox’s scuttled attempt to buy the company for $80 billion.

Time Warner shares closed up $1.57, or 2.2%, to $72.21 on Wednesday. Shares are up 3.6% this year.

Follow me on Twitter: @DanielNMiller