Warner eyes cuts, "Watchmen" talks proceed

By Sue Zeidler

LOS ANGELES (Reuters) - Warner Bros is considering ways to slash its budget by 10 percent, saving tens of millions of dollars via layoffs or other steps, as the studio nears an expected settlement of a dispute with a rival house over its upcoming "Watchmen" film.

Warner joins rivals from Sony Corp's Sony Pictures to Walt Disney Co in trying to offset falling film and flat DVD revenues in a rocky U.S. economy.

"No decisions have been made," said a Warner Bros spokesman regarding the cost cuts, which are widely expected to result in an unspecified number of layoffs at the studio, which released the blockbuster Batman movie, "The Dark Knight."

Warner Bros is owned by Time Warner Inc, which last week projected a loss for the year, compared with a previous forecast of earnings of $1.04 to $1.07 per share,

Meanwhile, another drama continues to unfold with Warner's upcoming high-profile release of "Watchmen," which is the focus of a copyright infringement battle between Warner and News Corp's Twentieth Century Fox.

The two studios began negotiating last week and are expected to announce a settlement soon, enabling Warner to release the film in March as scheduled.

Both Fox and Warner said on Tuesday settlement talks were continuing, with one studio executive describing them as "fruitful."

Warner Bros produced the movie based on a 1980s comic book series by Alan Moore and Dave Gibbons about superheroes operating under the specter of nuclear annihilation.