The press has been saying for a while now that New Line Pictures was in desperate need for another hit, not really having had much of any kind of success since their three year stint with Lord of the Rings. It looks like all of that talk was right on the money, as Variety reports that Time Warner has announced their intentions to fold New Line into Warner Brothers. Say goodbye to execs Bob Shaye and Michael Lynne, who will be leaving the company, although they are apparently negotiating to keep some sort of business relationship going with Warner Brothers.

Prior to the announcement, Shaye and Lynne sent out a message to New Line staff members stating that the studio would maintain its identity and continue to produce, market and distribute movies. That almost sounds like business as usual, except they’ll be doing it under the Warner Brothers watchful eye instead of working independently. Operations for the studio will probably reduce in size as well, meaning consolidation and a downsizing.

Time Warner CEO Jeff Bewkes said the other change for the studio is that it would no longer be so quick to sell off international rights. It looks like Warner Brothers is really keeping an eye on markets beyond the domestic one, which means New Line will from now on as well.

There’s quite a bit of reporting going on about this, from some sites saying this was a move by Warner Brothers to get rid of Bob Shaye and Michael Lynne, and others saying disagreements with Shaye and Lynne had nothing to do with this. From a simple business standpoint, this definitely makes sense. New Line has been hemorrhaging funds for a while now without a solid way to recoup them.

At least Shaye’s prediction will now come true: Peter Jackson will not make The Hobbit at New Line while he is in charge.