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To Reduce Costs, Warner Brothers Closing 2 Film Divisions

LOS ANGELES — Warner Brothers announced Thursday that it would shut two troubled film divisions, a cost-cutting move rooted in the changing economics of the specialty film business.

Picturehouse, known for art films like object.title class="Movie" idsrc="nyt_ttl" value="326961">“Pan’s Labyrinth,”/object.title> and Warner Independent Pictures, which distributed object.title class="Movie" idsrc="nyt_ttl" value="328540">“March of the Penguins,”/object.title> will cease operations in the coming weeks, Warner Brothers said. About 70 people will lose their jobs.

What will happen to the projects in development at the two companies must still be decided, said Alan F. Horn, the studio’s president.

“This reflects the reality of a changing marketplace and our need to prudently run our businesses with increased efficiencies,” Warner said in a statement.

Together, Picturehouse and Warner Independent released 12 films in 2007. Mr. Horn said that Warner would release “overall fewer movies” but declined to specify a goal.

The two labels were intended to tap a growing market for cerebral, low-budget films — and to make Warner competitive at the Oscars. But the company was late to the game. By the time Warner Independent was founded in 2003, every other major studio had already established a specialty division. Warner Independent never found a niche and suffered from executive infighting.

Meanwhile, a glut of movies in the marketplace — about 600 films were released in 2007, up from 450 in 2002 — has dented the profitability and reliability of specialty divisions. No longer can these units produce films on the cheap, apply a little marketing and watch the cash roll in. As competition has increased, advertising costs have soared.

Recent flops by Warner Independent include object.title class="Movie" idsrc="nyt_ttl" value="375398">“In the Valley of Elah,”/object.title> which took in a scant $6.7 million at the box office. Picturehouse managed to squeeze two Oscars out of object.title class="Movie" idsrc="nyt_ttl" value="226949">“La Vie en Rose”/object.title> in February, but the picture sold only about $10 million in tickets in North America.

In an interview, Mr. Horn said that Warner, part of Time Warner, remained committed to making specialty films, though he would not say how many. “We are not abandoning the independent marketplace,” he said.

The closures come after Time Warner’s recent decision to fold its New Line studio into Warner Brothers, eliminating 500 jobs. Under this configuration, New Line will use the main studio’s infrastructure to release about six films a year.

Warner will release the last pictures from the two labels over the next six months. Picturehouse, created in 2005 after Time Warner acquired Newmarket Films, the company behind object.title class="Movie" idsrc="nyt_ttl" value="290960">“The Passion of the Christ,”/object.title> is set to release a remake of object.title class="Movie" idsrc="nyt_ttl" value="55106;426704;55105;400300">“The Women”/object.title> in September. Warner Independent’s releases include object.title class="Movie" idsrc="nyt_ttl" value="415847">“Towelhead,”/object.title> about a Lebanese teenager growing up in Texas.