Time Warner’s recent decision to merge the operations of troubled minimajor New Line Cinema with those of Warner Bros. is bad news for more than New Line staffers. North of the border, the news went over like a lead balloon at Alliance Films.

‘It was a surprise, to say the least,’ says Alliance executive chairman Victor Loewy.

It’s a probable death knell for New Line’s output deal with Alliance, which is Alliance’s largest, with between 10 and a dozen releases per year, though its profitability varies from annum to annum.

‘This was done very quickly and there are no firm plans for anything,’ says Loewy. ‘We have not spoken to anybody. We don’t know what’s going to happen.’ If there’s no New Line, there’s no output deal, he added.

The loss of the contract would be yet another blow for Alliance, which has found itself hustling in an increasingly competitive distribution market in Canada. Maximum Films and Seville, two burgeoning distribution interests headed up by Loewy’s former business partner Robert Lantos and his former protégé Patrice Théroux, announced Monday they were joining forces. The new entity will look to give Alliance a run for its money.

Initially a true indie, New Line put itself into the major leagues with the Lord of the Rings trilogy, which brought in a disproportionately high box office here in Canada for Alliance Atlantis’ Motion Picture Distribution Group, as it was known at the time. Other New Line releases handled by Loewy and company include Austin Powers, The Wedding Crashers and, more recently, The Golden Compass. Upcoming New Line releases by Alliance in Canada include Sex and the City: The Movie and Four Christmases with Vince Vaughan.

New Line’s output contract with Alliance expires at the end of the year anyway. ‘We have no idea what Warner Bros. will decide to do,’ Loewy tells Playback Daily. ‘They have their own distribution operation in Canada and they probably will want to do their own.’

A Warner Bros. spokesman says the company is in the process of evaluating its options regarding New Line’s output deals worldwide. The company has said that most of New Line’s staff of 600 will be let go and that the company will be folded into Warner Bros. as a small genre arm.

Loewy’s relationship with New Line goes back to his early days in the business, when he and Lantos set up shop as Alliance Communications 35 years ago. ‘This deal is more than 30 years old,’ he says. ‘When we signed this deal there were no specialized films. There was none of that. It was because they were operating just in the United States.’

Also up in the air is the fate of Picturehouse, another Time Warner subsidiary with which Alliance has an output deal, and for which Alliance distributed Oscar-winner Pan’s Labyrinth last year.

Distribution expert Howard Lichtman of the Lightning Group points out that it may be in Warner Bros.’ interest to keep Alliance onboard. ‘Does Warner Bros. have the infrastructure currently in place in Canada to handle the amount of releases that New Line has here?’ he asks, noting that WB might need ‘an extra set of arms’ to handle Canada.

But even if the worst should come to pass and New Line and Alliance part ways, Loewy points out that there are other fish in the sea. ‘If we lose that we’re going to replace it with other output stuff,’ he says. ‘There’s other product around. I’m sure we’ll find something.’

Alliance also has output deals with Focus Features, Miramax, The Weinstein Company, and newly formed Overture, and their expiry dates are staggered to minimize risk. ‘The most important thing to understand is there’s a whole bunch of other opportunities out there that we’re actively pursuing,’ says Odeon Films SVP Mark Slone, including expanding the company’s European operations. Alliance owns distributors Momentum Films in the U.K. and Aurum in Spain.