Time Warner-Turner merger to bring big changes.

Many of the companies' local entities would become redundant when deal closes

Time Warner Inc. and Turner Broadcasting System Inc. might be headquartered on the other coast, but their upcoming merger is expected to create major shifts in the entertainment industry in Los Angeles County.

A seven-member advisory committee made up of top executives from both companies is currently hammering out a strategy for how to unite the two entertainment and media giants. At the top of the priority list is identifying redundancies and determining which divisions to sell or restructure to reduce debt and maximize efficiency.

Many of those redundant entities are located in L.A. County, according to analysts.

The heart of Time Warner's entertainment division is headquartered in Burbank, where the Warner Bros. movie studio and the Warner Bros. Records label are located. Time Warner also has local offices for many of its publishing, media and entertainment divisions, including a large contingent at the Home Box Office Inc. premium cable service in Century City.

In all, Time Warner employs 9,400 people in L.A. County.

But it is the local divisions of the Turner empire that are likely to see the biggest changes if the merger is approved by shareholders Oct. 10, analysts said. While layoffs are expected to be minimal, many of Turner's film production and distribution entities are expected to be sold, broken up and/or swallowed by Warner Bros.

Turner employs more than 1,600 people in L.A. County, where its major holdings include production companies New Line Cinema and Castle Rock Entertainment (both based in Beverly Hills), Hollywood-based Hanna-Barbera Cartoons Inc., and a large warehouse facility for the company's film and video library in Culver City called Turner Entertainment Distribution Services (TEDS).

Most ambitious of all the local entities is Turner's film production and distribution arm in Century City, essentially a miniature movie studio, that includes Turner Pictures, Turner Feature Animation and Turner Pictures Worldwide Distribution Inc. Ominously, nearly all the functions of this studio are duplicated by Warner Bros.

"If I were guessing, I'd say (Warner Bros. co-chairmen) Terry (Semel) and Bob (Daly) will be running the whole thing inside of two years," said entertainment attorney Michael Adler, a partner at West L.A.-based Mitchell, Silberberg & Knupp.

Perhaps the biggest question facing Turner and Time Warner executives is the fate of New Line. Besides producing such films as "The Mask," "Dumb and Dumber," and the "Teenage Mutant Ninja Turtles" series, New Line has its own distribution division that operates in conjunction with Turner Worldwide Distribution.

New Line is the subject of rampant speculation in the press, with new sale rumors - often conflicting - surfacing weekly. The most recent was a USA Today article last week stating that officials from Turner and Time Warner had agreed to keep the company, but no sources were quoted in the brief story.

A New Line spokesman declined comment, except to say that no sale decision has yet been made.

While the fate of New Line is unclear, there is universal agreement that Castle Rock will soon be sold. No official announcements have been made, but Sony Pictures Entertainment and MCA Inc. reportedly are in active talks to acquire Castle Rock, whose financial performance in recent years has been dismal.

Turner was forced to write off $28 million in the second quarter of this year because of the poor performance of recent Castle Rock releases, including "Striptease," according to a financial statement from Turner. Nonetheless, Castle Rock's television department is considered a prize, with such popular series as "Seinfeld" and "The Single Guy" to its credit.

Another area ripe for consolidation is Turner's various animation divisions. Hanna-Barbera, creator of the landmark TV cartoon "The Flintstones," was purchased in 1991 to supply content for Turner's Cartoon Network on cable television, while Turner Feature Animation was started up two years ago to create animated films.

Both these functions are duplicated by Warner Bros.' extensive animation division. In fact, animators with Turner Feature Animation are already working closely with Warner Bros., and there is little question among analysts that the staff of this division will simply be shifted to Burbank. Meanwhile, Hanna-Barbera is likely to remain semi-independent.

"I don't think you'll see any of the animation assets sold, but I'll bet you'll see some bodies being rearranged and some consolidation in the administrative functions," said Steve Cesinger, managing director and head of the media group at L.A.-based investment bank Greif & Co.

Cesinger, like other analysts following the proposed merger, does not foresee major layoffs in Los Angeles after the deal is finalized.

"I wouldn't want to be a receptionist (at Turner's production and distribution offices in Century City); let's put it that way," Cesinger said. "But if you're on the line selling content or making creative decisions, I think your job is safe because those people will simply become part of Warner."