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AT&T drops the hammer at WarnerMedia

Will the Dallas-based phone company begin injecting data-based decision-making into the Los Angeles- and New York-based world of content creation?
Image: Robert Greenblatt at an event in Los Angeles on March 18, 2017.
Robert Greenblatt at an event in Los Angeles on March 18, 2017.Christopher Polk / Getty Images file

After waiting 28 months to finalize its $85 billion acquisition of Time Warner, AT&T is moving quickly to put its imprint on the media company it now owns.

Two top executives have already left the newly named WarnerMedia, and AT&T is now breaking down some of the corporate dividers among its three separate units -- HBO, Turner and Warner Bros. That has raised questions from some industry analysts and entertainment figures about whether the Dallas-based phone company will begin injecting data-based decision-making into the Los Angeles- and New York-based world of content creation.

“We’ve seen this movie before,” said Craig Moffett, a telecom company analyst with the independent equity firm MoffettNathanson. “Phone companies have tried to get into media multiple times in the past, and it has always failed in large part because of culture clashes.”

The moves come at an important inflection point for the entertainment business. The best Hollywood talent has become increasingly drawn to the energy, excitement and money offered by streaming giants, such as Netflix and Amazon. Richard Plepler, known in the entertainment industry for wooing A-list celebrities, has been replaced atop HBO by Robert Greenblatt, a former NBC Entertainment chairman, who will serve as chairman of WarnerMedia Entertainment and oversee much of the cable TV giant Turner. (Comcast owns NBCUniversal, which is the parent company of NBC News.)

The appointment is a first significant step toward consolidating fiefdoms that ran separately for decades within Time Warner and included HBO and Turner Broadcasting, which included cable channels CNN, TBS, TNT, TruTV, Cartoon Network and Adult Swim, as well as the Warner Bros. movie and television studios. (The company also houses a 50 percent share of The CW broadcast network, shared with CBS.)

Greenblatt’s appointment tears down some of the walls that had separated internal units, which were run almost entirely independently. Turner Broadcasting’s sports assets are going to Jeff Zucker, who will also continue to run CNN, and its pre-adolescent channels are moving to Warner Bros. Entertainment. It seems unclear at this stage if the Turner brand name will remain a force or be consigned to the dustbin like the brand name Time Warner.

Greenblatt will be in charge of the entertainment divisions and the streaming video service that will go up against Netflix, Amazon, and soon Disney and Apple.

While Greenblatt is credited by some in the media industry with leading the successful turnaround of NBC’s entertainment division, he faces a challenge in retaining WarnerMedia’s talent and content creativity at a time when AT&T is already showing that it intends to keep WarnerMedia on a short leash.

One person, who deals with WarnerMedia units on a regular basis and asked to remain anonymous due to those business relationships, said that the former Time Warner executives were prevented from making decisions even on small projects without AT&T’s approval.

The ins and outs

Moffett said that telecom companies, such as AT&T, tend to be very different from content companies. Telecoms are a “stultifying and bureaucratic” business, he said, while media companies can appear undisciplined and erratic.

“They see the world through radically different glasses,” he said.

He suggested it is difficult for numbers-focused executives to put a value on the relationship-oriented nature of show business. The value of the people who “can call Brad Pitt’s agent may not show up on a piece of paper,” Moffett said, “but you’re in real trouble if you lose those kinds of people.”

Documentary maker Alex Gibney, who directed HBO’s upcoming film on the fall of the blood-testing startup Theranos, expressed his concerns about the recent shifts.

“It seems rash to push out the key executive responsible for so much great programming,” Gibney said, referring to Plepler.

Gibney, who also made HBO’s “Going Clear,” a documentary about Scientology, said the company excelled at picking projects and people.

“The disquieting thing is that HBO was a great curator of projects and talent, and it appears the new owners are not being as assiduous,” he said.

One former Time Warner veteran, who asked to remain anonymous to be able to speak freely about a former employer, said Hollywood agents have been calling to trying to figure out who they should be dealing with on their projects. Plepler was their go-to person for all things. Now they know it’s Greenblatt.

The bell tolls

AT&T is also looking at other ways to collapse walls separating the three main businesses by possibly having producers share production studios that may once have been the preserve of a single unit, two people familiar with the company suggested.

“There were countless times in the last eight years that it became more than evident that the structure that allowed for three silos wasn’t the most effective or efficient way to manage it,” one former executive who did not wish to be named said.

AT&T, which has told investors to expect $2.5 billion of cost savings, has already made a handful of subtle but notable changes. HBO Sports said it would drop boxing after becoming one of the most high-profile broadcasters of the sport for decades. AT&T shuttered two streaming services, FilmStruck and DramaFever, the latter a streaming service showing Korean dramas.

The company has told Wall Street that reducing its $180 billion of debt is its top priority in 2019. AT&T is selling its 10 percent stake in the streaming service Hulu and is looking to sell some of its real estate portfolio, according to multiple reports. WarnerMedia may also be considering the future of The CW and its licensing of shows such as “Riverdale” to Netflix, one person said.

AT&T’s changes come after the company’s chief executive, Randall Stephenson, said in a variety of public interviews that he was intent on keeping the culture of its new content acquisition.

“This is a business we’re buying that is all about creativity and talent, and how can we ensure that we don’t disrupt or interfere with that creative capability,” Stephenson said during a CNBC appearance in June.

He added that he’d written to employees in an effort to calm any concerns that AT&T would be making major changes, particularly around how the companies operate.

“This is going to be one of his challenges,” Stephenson said of John Stankey, the CEO of WarnerMedia. “How do you preserve that creative culture? We feel good about it.”

Stephenson echoed that sentiment in an interview with Recode’s Peter Kafka in February.

“Protecting the talent, protecting directors, and protecting producers, and making sure that you maintain an environment where they want to do business with you is critical,” Stephenson said. “And so I think so far, mission accomplished.”