Sources tell me that Bob Shaye and Michael Lynne could officially find out as soon as this week what will happen to New Line Cinema and their expiring employment contracts at the movie studio they co-founded 40 years ago. “This is the week Bob gets told what the decision from Warner Bros will be,” an insider confirmed to me. BusinessWeek has already urged Time Warner Chief Jeff Bewkes to move New Line into the parent company’s Warner Bros fold. After that, in a conference call with analysts on February 6th, Bewkes specifically mentioned that New Line Cinema is ripe for expense reductions, then noted that changes in the film industry leave less purpose for the studio.

I reported on January 21st that, according to my sources, Shaye’s and Lynne’s contracts wouldn’t be renewed by Bewkes and that the studio would either be folded into Warner Bros (most likely) or sold altogether (least likely). Then I was told that, when Bewkes met with the New Line pair to deliver the bad news, the twosome wanted to put together a reorganization plan that would save the company a lot of money in exchange for a contract extension that leaves them as co-heads of the studio. But Bewkes hasn’t seemed interested in that scenario, insiders tell me. And, this week, he’s supposed to let Shaye and Lynne know his final decision.

The timing is bad since it comes on the heels of the estate of Lord of the Rings creator J.R.R. Tolkien suing New Line Cinema, claiming the company failed to pay a cut of gross profits for the movies based on Tolkien’s books. (Shaye’s studio is already paying a legal settlement to LOTR trilogy director Peter Jackson who is still auditing New Line about his profit participation.) Oh, and New Line is releasing on Friday the Will Ferrell basketball comedy Semi-Pro helmed by first-time director Kent Alterman, who to do the pic stepped down from his post as the studio’s Executive VP of Production working for Shaye and Lynne.

1. Worse News For New Line: Tolkien Sues
2. BusinessWeek Urges Jeff Bewkes To Move New Line Into Warner Bros
3. TW’s Bewkes Confirms New Line Changes
4. SOURCES: Terry Semel Looks At New Line
5. SOURCES: Bob Shaye’s New Line Contract Won’t Be Renewed By TW Boss
6. Peter Jackson And Bob Shaye Settle; Jackson Will Exec Produce ‘Hobbit’
7. Another Reason Bob Shaye Should Retire
8. The Dog Ate New Line’s Balance Sheets…
9. Bob Shaye’s Mea Culpa Too Little Too Late
10. It’s Official! Carlisle To New Line
11. Is This Russell’s New Line Replacement?
12. Another Reason Why Bob Shaye Is A Prick
13. Bob Shaye Looks Like Even Bigger Idiot…
14. Studios To Fight Over Unusual Peter Jackson Pic Deal (But Not New Line)
15. Bombs Away: Shaye’s ‘Mimzy’ Tracking 0
16. Peter Jackson Answers Lord Of The Rants