Time Warner Inc announced that it is consolidating its two film studios, Warner Brothers and New Line Cinema, putting an end to the latter's 40-year run as an independent film studio. New Line Co-Chairmen and Co-Chief Executives Robert Shaye and Michael Lynne decided to leave the company, Warner says.

The absorption of the legendary movie studio, behind successful movie franchises such as "The Lord of the Rings," "Austin Powers" and "A Nightmare on Elm Street," will lead to a massive lay-off of a large portion of the 600 staff at its Los Angeles and New York facilities. Interestingly enough, the studio is to release today the basketball spoof "Semi-Pro" starring Will Ferrell.

This is just the last of a series of similar moves in the movie industry. The legendary Metro-Goldwyn-Mayer was grabbed by a group led by Sony Pictures and Comcast Corp. DreamWorks SKG, founded by Steven Spielberg, Jeffrey Katzenberg and David Geffen (thus SKG), was sold to Viacom Inc. and absorbed as a part of Paramount Pictures. Harvey and Bob Weinstein's Miramax Films nearly disappeared when swallowed by Walt Disney Co.

"Between the cost savings and the revenue enhancements, we believe we can at least double the earnings of New Line," said Time Warner Inc.'s recently named Chief Executive Jeffrey Bewkes to Los Angeles Times.

"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," he said in a statement.

New Line will allegedly maintain separate development, production, marketing and distribution operations, but they will be controlled and coordinated by Warner Bros. to cut costs and boost margins. New Line is slated to release soon the movie version of the popular "Sex and the City" show and also cleared the path for the making of "The Hobbit."

Academy Award-nominated Mexican film director Guillermo del Toro, 43, is reportedly in talks to direct a double bill of movies based on JRR Tolkien's The Hobbit. The movies will be co-financed by New Line and MGM and Peter Jackson, who was the director of the initial Lord of the Rings trilogy, will be executive producer.