Warner Bros. will absorb the studio behind ''The Lord of the Rings''

If only New Line staffers knew back in October that their star-studded 40th-anniversary bash at NYC’s Lincoln Center was an early going-away party, they might have drunk more champagne. On Feb. 28, Warner Bros. announced plans to absorb the mini-major — which introduced Freddy Krueger, Austin Powers, and Frodo — into a smaller unit of the studio. (Warner Bros. and ENTERTAINMENT WEEKLY are both divisions of Time Warner.) Founder Robert Shaye and partner Michael Lynne are out, and major layoffs are expected. Says Time Warner spokesman Edward Adler, ”At this point we can’t determine the number of layoffs because Warner Bros. has yet to go through everything, but it will be a large number.”

In the four years since the multibillion-dollar success of the Lord of the Rings trilogy, the studio has struggled to find another Precious One at the box office. The $180 million gamble on The Golden Compass last fall yielded just $70 million Stateside, while this month’s Will Ferrell comedy Semi-Pro opened to a meager $15 million. Despite the shake-up, much of New Line’s existing slate is still on track. Harold & Kumar Escape From Guantanamo Bay and Sex and the City: The Movie will likely hold their April 25 and May 30 premieres, especially since Warner has only Speed Racer to unveil during those two months. Release dates for four other completed films, including He’s Just Not That Into You, the Jennifer Aniston ensemble comedy (currently slated for August), are more uncertain — as Warner Bros. will need to juggle them with its other summer fare.

The move also leaves dozens of projects in development in doubt, though a planned two-film adaptation of J.R.R. Tolkien’s The Hobbit exec-produced by Peter Jackson is likely to move forward. And cameras will continue to roll on four New Line films already in the works: the Matthew McConaughey starrer Ghosts of Girlfriends Past; My Sister’s Keeper, starring Cameron Diaz and Abigail Breslin; Final Destination 4; and a Friday the 13th remake. That last production is a sign of Warner’s plan to return the new New Line to its roots, as an outlet for lower-budgeted, edgier genre fare. Notes one insider, ”New Line finding its voice and direction again is not such a bad thing.”