Warner Bros. Revamping Movie Compensation in HBO Max Era

Following Warner Bros. Pictures’ decision to release its 2021 theatrical slate concurrently on subscription streaming service HBO Max in consumer homes (for 31 days) due to the ongoing pandemic, some content creators and talent representatives cried foul, claiming they and their clients were being shortchanged by the new policy.

Now the studio has reportedly implemented new guidelines aimed at better compensating talent and production during the pandemic, according to Bloomberg, which cited sources familiar with the situation. Warner will now pay producers and talent from fees generated by Max to offset lower box office revenue and performance-based bonuses.

Hollywood has often compensated producers and talent with upfront compensation and the potential for a lot more on the backend depending on a movie’s box office success. Actor Robert Downey Jr. reportedly earned $75 million from Disney/Marvel Studios’ Avengers: Endgame under such an arrangement.

But with the pandemic severely curtailing the U.S. box office, Warner’s decision to release movies direct to consumers all but ended that traditional compensation channels, angering filmmakers such as Christopher Nolan and Denis Villeneuve, whose movies Tenet and the upcoming sci-fi remake Dune are released through the studio.

“AT&T has hijacked one of the most respectable and important studios in film history,” Villeneuve told Variety. “There is absolutely no love for cinema, nor for the audience here.”

Talent agencies complained the Max/theatrical strategy “unilaterally determined” a financial value for their clients’ work to “benefit the long-term prospects of HBO Max and the finances of AT&T,” according to Richard Lovett, president of the CAA agency.

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, contends the premium VOD distribution strategy hasn’t proven to be as much of a threat to exhibitors as previously thought. Indeed, Disney has yet to release financial data regarding its decision to offer live-action Mulan directly to Disney+ subscribers for an additional $29.99 fee.

“We think the exhibitors will aggressively negotiate for far fewer films to be released day-and-date on HBO Max, based on the timing of vaccine distribution instead of the full calendar year,” Pachter wrote in a Jan. 11 note.

WarnerMedia contends the situation remains fluid with Warner planning to return to the traditional theatrical window in 2022 following vaccine inoculation.

“Our orientation in these situations is always to be generous,” WarnerMedia CEO Jason Kilar said in a recent interview.

WarnerMedia Boss Jason Kilar Sends Out Staff Memo Announcing Job Cuts

WarnerMedia CEO Jason Kilar Nov. 10 sent out a staff email outlining the company’s ongoing restructuring, which the former Hulu CEO said included addressing “which jobs are being eliminated and which roles have changed.”

The memo did not identify specific positions or personnel. A town hall meeting is scheduled for Nov. 11 at 2 p.m. ET/11 a.m. PT at which Kilar said he will answer staff questions.

Since acquiring Time Warner and creating WarnerMedia, AT&T has grappled with paying down billions in debt and streamlining costs magnified during a pandemic.

Kilar, who was hired by corporate parent AT&T on April 1 to spearhead the former Time Warner company, which includes Warner Bros., HBO and Turner, has previously disclosed that upwards of 20% of WarnerMedia’s staff positions would be let go. In August, Kilar cut about 500 positions, including that of longtime home entertainment boss Ron Sanders, as part of restructuring the company’s entertainment studios, elevating HBO Max companywide, and consolidating commercial activities.

“This is a very painful email to write,” Kilar wrote. “And for a number of you reading this, I realize it will be even more painful to receive. For this, I am sorry.”

“Today, we have arrived at a number of difficult decisions that are resulting in a smaller WarnerMedia team,” Kilar wrote. “This is a function of removing layers and the impact of consolidating previously separate organizations. Starting today in North America, we will be sharing which jobs are being eliminated and which roles have changed. We are continuing to review proposed changes in other countries across our non-U.S. businesses, the timing of which will vary according to local regulatory requirements. Nothing about this is easy. But please know, these reductions are not in any way a reflection of the quality of the team members impacted, nor their work. It is simply a function of the changes I believe we must make in order to best serve customers. For those impacted, we will be offering severance and healthcare packages, in addition to professional services and team member assistance programs.”

Kilar said he anticipates that organizationally, things will “settle down materially” in the weeks and months to come, while adding that WarnerMedia’s future is not static.

“Our future is about inventing ever better ways to move the world through story, which entails embracing change,” he wrote. “I have every confidence in this world class team to do just that.”

To our colleagues who are leaving, I wish there were words to lessen today’s pain. Your contributions are a permanent part of this great company and today’s news does not change that. I am extremely thankful for all that you have done for this team and this mission. I hope that at some point you will look back on all of it with immense pride.

WarnerMedia Planning to Cut Workforce Upwards of 20%

WarnerMedia CEO Jason Kilar is continuing to clean house since being hired earlier this year by AT&T CEO John Stankey to run the former Time Warner entity. Kilar, who formerly headed Hulu, reportedly is seeking additional entertainment cuts approaching 20% of the company’s workforce since eliminating 500 positions in August. Those layoffs included Ron Sanders, president of Warner Bros. worldwide theatrical distribution and president of Warner Bros. Home Entertainment. Cuts in the coming weeks are expected at Warner Bros., HBO, TBS and TNT.

“Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic,” a WarnerMedia spokesman told The Wall Street Journal, which first reported the restructuring. “We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.”

WarnerMedia reportedly had 26,000 employees when it was Time Warner. With the entertainment sector in the midst of the coronavirus pandemic, and studio and TV production in slow motion, WarnerMedia is putting much of its resources into HBO Max, the recently-launched SVOD and pending AVOD platform.

Max had about 4.1 million people activate the app in the first month since launching on May 27. When combined with a negotiations impasse with Roku regarding placement of the Max app on the streaming media manufacturer’s platform, the SVOD and pending AVOD platform significantly lags behind rivals Disney+, Amazon Prime Video and Netflix.

In addition, Warner Bros. continues to push back theatrical releases to 2021, including most recently sci-fi reboot Dune, from December to next year. Robert Pattinson starrer The Batman has been bumped from 2021 to 2022. Patty Jenkins sequel Wonder Woman 1984 has been bumped three times to the current Dec. 25 release.

“There’s nothing that’s sacred anywhere in the business,” Stankey told The Journal earlier this year. “WarnerMedia is no exception to that.”

WarnerMedia CEO Not Concerned With HBO Max Sluggish Start

Speaking recently on CNBC’s “Squawk Box,” WarnerMedia CEO Jason Kilar said he is “not at all concerned” with the slow start for subscription streaming service HBO Max, saying the platform was in a “really good position” based on previous estimates.

“If you look at last year at what we hoped we would be at the end of 2020, which is 36 million HBO and HBO Max subscribers, we announced just recently we are already north of 36 million, and obviously the number is going up every day,” Kilar said.

Kilar was hired May 1 to aggressively guide the former Time Warner company into the digital age — underscored by the May 27 launch of HBO Max. Since an initial observation period, Kilar has implemented massive corporate downsizing resulting in the elimination of about 600 positions across Warner Bros., Turner (except CNN) and HBO.

The former Hulu founder brought in fellow Hulu alum Andy Forssell as GM, spearheading marketing, consumer engagement and worldwide rollout of Max in a crowded SVOD market dominated by Netflix, Amazon Prime Video — and Disney-owned Hulu.

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Despite HBO’s brand recognition, subscriber/consumer adoption of Max has been slow. The service has attracted about 4.1 million subs through parent AT&T’s most-recent fiscal period, despite HBO having more than 35 million existing pay-TV subs. Undermining conversion efforts are ongoing negotiation challenges between WarnerMedia, Roku and Amazon Fire TV — the latter two key to third-party OTT video consumer adoption.

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Consumer adoption of Max pales in comparison to Disney+, which attracted 10 million sign-ups in its first 24 hours last November, and now has more than 60 million subscribers. In addition, NBCUniversal’s upstart Peacock service has generated more than 10 million subs. NBCUniversal owns CNBC.

Kilar argued that when comparing “apples to apples,” Peacock subscriber conversion of linear-TV subscribers isn’t demonstrably better than Max. He said Disney+, on the other hand, has the advantage of leveraging a 100-year-old family brand known globally.

“[Disney] did exactly what they should have done and kudos to them,” Kilar said. “Ours is a very different journey. I would argue ours is a bigger outcome because we are going after all members of the family. The opportunity is bigger, but it does mean the journey is going to be different because we don’t have a 100-year-old surgically-precise brand around families, specifically with kids under the age of 9.”

Kilar was asked if the HBO brand has become confusing to consumers due to the myriad access points, including HBO, HBO Go, HBO Now and Max. He agreed, saying both HBO Go and HBO Now are being “sunsetted,” with the end result continuing to drive users to HBO and the brand’s quality of programming.

“We want people to think of our stories as being a cut above,” Kilar said.

Ron Sanders Exits WarnerMedia, After Storied Career, in Management Reorganization

Veteran Warner Bros. Home Entertainment executive Ron Sanders is among a group of key executives who are leaving the company in the wake of a management restructuring implemented by new WarnerMedia CEO Jason Kilar.

Sanders, president of Warner Bros. worldwide theatrical distribution, and president of Warner Bros. Home Entertainment, has been an integral part of the studio’s retail management for nearly 30 years.

Sanders joins Jeffrey Schlesinger and Kim Williams as the latest high-profile executives among a reported 600 employees let go following the Aug. 7 departure of Bob Greenblatt and Kevin Reilly.

The latest cuts were first reported by The Wrap.

Sanders was named president of worldwide distribution for the entire motion picture group in January 2018, retaining his responsibilities as home entertainment chief. In that role, which he assumed in 2013, he oversaw the global distribution of home entertainment products from Warner Bros. Pictures Group, Warner Bros. Television Group and Warner Bros. Interactive Entertainment. He was also responsible for the studio’s video game publishing business, and helped build WBHE into the industry’s largest digital distributor of films and TV shows through VOD and EST.

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“Ron is an exemplary executive and Warner Bros. was lucky to have him as one of their senior leaders for so long,” said Amy Jo Smith, president and CEO of DEG: The Digital Entertainment Group, where Sanders had held several key leadership roles, including chair. “Ron played a key role in guiding and growing DEG and we will also be grateful for his involvement, his support and his scruples. He’s such a good guy.”

Sanders joined what was then Warner Home Video in 1991 and learned the business from some of the most talented executives of the day, led by then-division president Warren Lieberfarb.

“I hired Ron from Procter & Gamble, where he was a regional sales manager, and nurtured his growth,” said Warren Lieberfarb, hailed as the “father” of DVD. “I promoted him over the years, and he was eminently qualified. I am sure the future will offer him many more opportunities.”

According to a column by Media Play News publisher and editorial director Thomas K. Arnold, “The 1990s were a remarkable time in home entertainment: We saw the rise of sellthrough, the development of direct sales and, of course, the launch of DVD, birthed at Warner by Lieberfarb and his team. … Anyone who knows Ron Sanders, who has worked alongside him, knows how incredibly hard it is to dislike him. When he says something, he means it. When he makes a promise, he follows through. He looks you in the eyes when he speaks to you; he is passionate about the industry, about Warner Bros., about business, about life.”

Sanders ran Warner’s rental business during the tumultuous mid-1990s period of consolidation and copy-depth incentives. He moved into consumer sales just as DVD was taking off and in July 1998 was sent to London as managing director of the United Kingdom and Ireland divisions. A year and a half later, he was promoted to head of the entire EMEA (Europe, Middle East and Africa) region, overseeing Warner’s home video operations in 28 territories.

He returned to the United States in 2002 and was appointed president of Warner Home Video in October 2005. In May 2013 he was named president of Warner Bros. Worldwide Home Entertainment Distribution, with oversight of the global distribution of home entertainment products from Warner Bros. Pictures, Warner Bros. Television, and Warner Bros. Interactive Entertainment (WBIE).

“Throughout this well-deserved rise, Sanders has remained remarkably grounded,” Arnold wrote in his column. “He and I used to swap stories about chauffeuring our kids to soccer games. … Mindful of his experience living with his family in London, Sanders endowed a study abroad program at his alma mater, Auburn University, where he also served on the Harbert College of Business Advisory Council.”

WarnerMedia CEO Jason Kilar Shakes Up Management; Kevin Reilly, Bob Greenblatt Out

Former Hulu CEO Jason Kilar was hired 90 days ago to shake up WarnerMedia and make the branded upstart SVOD service HBO Max competitive with Netflix, Amazon Prime Video, Disney+, Peacock — and Disney-owned Hulu.

Kilar took a major step Aug. 7, letting WarnerMedia chairman Bob Greenblatt and Kevin Reilly, chief content officer for HBO Max and president of TNT, TBS and truTV, go in a major management reorganization. Andy Forssell, who worked with Kilar at Hulu, has been hired to oversee Max.

Jason Kilar

Warner Bros. CEO Ann Sarnoff, who replaced Kevin Tsujihara, and Casey Bloys, president of programming at HBO, will spearhead a combined oversight of studios and networks. No other management changes were disclosed.

Greenblatt and Reilly are industry veterans, with the former leaving NBCUniversal to help launch Max. Reilly has held executive positions at NBC, Fox, FX and Turner.

Kilar, who outlined the changes in a letter to staff, outlined five areas he seeks to improve: HBO Max’s scope and importance within the company; simplifying studio internal structure; creating a consolidated International unit focused on scale and efficiency; bringing our key commercial activities into one group; making other structural changes for efficiency and company effectiveness.

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The management changes aren’t surprising since Max launched with what some observers have characterized as an underwhelming consumer response. AT&T CEO John Stankey said Max generated 3 million subs through the second quarter, ended June 30, adding another one million thus far in the current quarter. With more than 30 million HBO pay-TV subs, including HBO Now, the conversion rate is disappointing.

“Because of the gift that is the Internet, we have what I believe is one of the greatest opportunities in the history of media, which is to deliver our beloved stories and experiences directly to hundreds of millions of consumers across the globe,” Kilar wrote. “The pandemic’s economic pressures and acceleration of direct-to-consumer streaming adoption places an even higher premium on these points.”

AT&T CFO: HBO Now Viewership Up 40% During Pandemic

AT&T’s singular streaming video focus is on the recent subscription video-on-demand launch of HBO Max. Yet, the telecom’s existing SVOD service, HBO Now, which launched in 2015, saw a 40% uptick in viewership during early days of the coronavirus pandemic, CFO John Stephens said June 17 during an investor event.

Speaking remotely at the Credit Suisse Virtual Conference, Stephens said consumer response to Max, which launched less than three weeks ago, remains promising, adding he expects AT&T to announce subscriber data on the earnings call in July.

AT&T CFO John Stephens

AT&T’s WarnerMedia segment, which operates HBO, recently announced that HBO Now would be called HBO going forward. This, despite the fact Now subs who access the platform through HBONow.com, Google or Apple TV automatically have access to Max at no extra charge. Now subs who access via Roku, Amazon Prime Channels or third-party ISP, however, must download the Max app and re-register.

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Separately, HBO Go, which offers HBO pay-TV subs on-demand access to programming, is being phased out with subs given the option to migrate to Max.

“Quite frankly, on the HBO Max side, we’ve been pleased with where we’re at,” Stephens said. “But it’s been three weeks or not quite three weeks. And so from that perspective, we’re — it’s early. We’re — well, I’m very about positive it, but it’s early.”

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The CFO’s measured support for Max underscores corporate’s sometimes confusing messaging surrounding HBO’s streaming assets. Stephens hinted that was one of the reasons AT&T hired former Hulu CEO Jason Kilar to run WarnerMedia, which includes Warner Bros., Hulu and Turner.

“[Kilar’s] very experienced in over-the-top products and launching, and … he’s very helpful to what was a very strong team already,” Stephens said. “We feel very good about that. And we’re optimistic. We just remain optimistic. It’s a multiyear process. But so far, so good.”

Stephens says AT&T is sticking to previous guidance projecting 50 million Max subs by 2025.

“We’re going to give it some more time and make sure we do full measure,” he said. “But yes, we saw increased [Max] engagement. The engagement really improved in HBO Now.”

WarnerMedia Names Richard Tom New CTO

New CEO Jason Kilar June 1 increased his management footprint on WarnerMedia by naming former colleague Richard Tom chief technology officer (CTO), effective immediately.

Tom will lead WarnerMedia’s technology and operations organization, including technology strategy, platform development and operations as well as shared services with other business segments. This includes the company’s data strategy, content delivery systems, master control operations, broadcast engineering and the technology platform for its new streaming service, HBO Max, among other areas. In addition, AT&T’s ad-distribution platform Xandr will also now report to Tom.

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Richard Tom

“Richard is a rare bird in that he brings deep technical chops, a dogged customer focus, clear and bold vision, and a magnetism that attracts other world class builders to him,” Kilar said in a statement. “WarnerMedia’s future will be as much about technology as it will be about storytelling and having Rich report to me as our technical leader strongly signals that.”

Prior to joining WarnerMedia, Tom served as an advisor and consultant for technology focused consumer and B2B companies, as well as venture-backed startups. His previous experience also includes serving as CTO and SVP of Hulu (when Kilar was CEO), where he built and led technical infrastructure at Hulu. He, alongside Kilar, co-founded Vessel — a global ad-supported, subscription-based, short-form video service that provided viewers early access to videos from top influencers, traditional television, major sports leagues and music publishers. Additionally, Tom served as CTO of Digital Entertainment at Verizon.

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Former WarnerMedia CTO, Jeremy Legg, will join AT&T Communications to lead the technology services organization as EVP and CTO, reporting to Jeff McElfresh, CEO of AT&T Communications.

“Jeremy, through his leadership of the technology organization, has had such a positive and material impact on WarnerMedia, with last week’s launch of HBO Max being just the most recent example,” Kilar said. “I know I speak for all of us when I say how glad I am that Jeremy won’t be going far. I wish Jeremy the best of luck in what is sure to be a period of wonderfully positive impact at AT&T.”

Jason Kilar: ‘The Value of VHS Was Robust’

In media interviews following his April 1 hiring announcement, Jason Kilar, former founding CEO of Hulu and new boss at WarnerMedia Entertainment, said the next 10 years matter more for him than the previous 85 years. Kilar, who helped start Hulu in 2007, left the streaming service in 2013 to start an ad-supported video platform called Vessel, which was shuttered in 2016.

“I actually believe this isn’t about WarnerMedia; it’s as much about Disney and NBCUniversal and others,” Kilar told Variety. “I actually think these companies are going to look so different within the next decade out of necessity and out of opportunity.”

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Strong words for a newcomer working for a company whose name and content library are all about legacy. But, then, the 48-year-old Kilar’s career has largely focused on emerging technology within the entertainment space.

Kilar, who begins his position on May 1, was also instrumental in launching Hulu Plus, which enabled viewers to pay extra to gain access to the most recently televised episodes in addition all episodes from every past season.

“We are still in the early innings of customers worldwide starting to watch content on demand,” Kilar said. “Under the hood from a tech standpoint, it’s very important to get that right, invest in it. Those are the two very important things.”

Kilar joins WarnerMedia as it readies the May launch of HBO Max during a global virus pandemic when domestic unemployment claims skyrocket and household discretionary spending comes to a halt. Kilar believes the lower cost of digital distribution bodes well during economic turbulence.

“The tech is hard to do but once you get it right, the cost of distribution in a tech environment like digital, is that variable costs are so small it allows you to go global,” he said.

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At the same time, Kilar said he respects the value of existing distribution channels, calling the expedited release of some theatrical releases into retail channels a “necessity” due to theaters shutting down worldwide.

In an interesting note, Kilar said his early days at Amazon included melding existing video technology with e-commerce.

“I wrote the business plan for Amazon getting into the video retail business,” he said. “VHS. Everyone wrote off the VHS business when the DVD showed up on the scene, but the value of VHS business was incredibly robust.”

Indeed, Amazon reportedly only stopped selling VHS titles in 2019, transferring ASIN#’s (Amazon Standard Identification Numbers) applied to VHS to related DVDs or Blu-ray Discs.