Warner Brothers shuts up shop

Rental signs are up on this Warner Brothers store in Times Square

Once thought to be the next gold mine, Hollywood-studio retail outlets promised executives a new medium by which to market profitable movie-related merchandise. But as BBC News Online reporter David Schepp explains, the riches have run out.

Times Square is about to lose one of the pioneering tenants that helped usher in a revival in the once-seamy New York neighbourhood.

Bugs Bunny is busy looking for a new hutch

Space-available signs have emerged on 1 Times Square, currently the home to a Warner Brothers Studio Store, which occupies 40,000 square feet in the building's first three floors.

The AOL Time Warner subsidiary first rented the space four years ago just as the overhaul of Times Square was gaining steam.

In a slowing economy, consumers' diet for pricey movie kitsch has declined right along with the stocks of Nasdaq, which also has its showplace in Times Square.

Contributing to the concept's woes is the fact that movie-related merchandise often loses its appeal once the movie disappears from theatres.

When the stores first opened in 1991, it was the first time many shoppers could encounter in one place merchandise fashioned after the beloved Warner Brothers characters many grew up with, including Bugs Bunny and Scooby Doo.

But sticker shock often lent many consumers to leave the stores empty handed, even if a bit light-hearted.

Last to go

The fact that the Times Square store is still open speaks to the strength of retail sales in the mainly tourist-dominated district. While a For Rent sign has already been posted, shoppers can still pick through Warner-Brothers merchandise.

Across town, on posh Fifth Avenue, the Warner Brothers Studio Store there has already closed, as have about half of the company's 150 stores, which were housed in malls across America.

Last week, AOL Time Warner said it was gearing up to close all of its US-based Warner Brothers Studio Stores by the end of October.

"We're in a wind-down process," a Warner Brothers spokeswoman said. "Management decided to get out of the owned-and-operated retail business.

Along with the stores will go 3,800 jobs, about 4% of AOL Time Warner's 90,000 total employees. The spokeswoman noted that the costs associated with shuttering the stores has already been accounted for.

The sale of the stores was not unexpected. After America Online and Time Warner completed their merger in January, the newly combined company said it would begin a search for buyer of the Warner Brothers-themed stores.

No buyer emerged, and the company has followed through with its warning that it would close the stores if they could not be sold.

Analysts expected the move. "This is not the best time to have real estate in the marketplace," said Thomas Filandro, a retail analyst at J P Morgan. "The climate has been very challenging."

That's all folks

AOL Time Warner's exit from the retail sector comes at a time when US consumers have forsaken pricey and trendy boutique shops for mass merchandisers, such as Wal-Mart and Target, where prices are more reasonable.

AOL Time Warner is hardly alone. Earlier this year, Walt Disney said it would close 70 of its Disney Stores, although that would still leave it with approximately 400 stores.

Last year, Viacom, abandoned plans to open a chain of theme stores and closed 15 stores based on its cable TV channel, Nickelodeon, which appeals to kids.