Activist Investor Seeks Ouster of AT&T CEO Randall Stephenson, COO John Stankey

With AT&T spending more than $163 billion acquiring DirecTV and Time Warner (now WarnerMedia), the telecom remains challenged paying down debt and orchestrating a clear strategy for the combined assets in an age of cord-cutting.

That appears to be the gist why activist investor Paul Singer’s Elliott Management sent a 24-page letter to the AT&T board seeking executive changes, according to industry tip sheet “Byers Market”.

Paul Singer

In the letter, Singer contends AT&T’s shareholder returns have underperformed the S&P 500 by well over 100 percentage points over the past 10 years.

He said the share-price underperformance has occurred as AT&T’s M&A strategy has taken it into multiple new markets over a series of deals totaling nearly $200 billion, and as its operational performance has measurably declined.

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As a result, AT&T, according to Singer, is “deeply undervalued,” trading at just over half the multiple of the S&P 500 — by far its biggest discount yet.

Singer, who owns a $3.2 billion stake in AT&T, is known for taking stakes in publicly held companies and firing off letters to the board in hopes of exacting executive change — which often occurs.

About AT&T, Singer reportedly seeks the removal of CEO Randall Stephenson and COO John Stankey (who is also CEO of WarnerMedia) regarding the former’s merger & acquisition strategies.

Specifically, Singer contrasts AT&T’s M&A strategy with former Time Warner CEO Jeff Bewkes.

“When Bewkes took over Time Warner as CEO, he inherited a sprawling company with numerous related but non-core assets — AOL, Time Warner Cable, a collection of publishing assets and other smaller businesses,” read the letter. “He then spent the following decade divesting the non-core assets in order to focus on Time Warner’s leading content franchises.
This strategy paid off: Time Warner became both a flourishing media enterprise and a strong investment, returning more than double the S&P 500’s ~140% return during Bewkes’ 10-year tenure.”

Singer called on the board to evaluate (i.e. sell off) assets such as DirecTV, AT&T’s Mexico operations and U.S. wireline (pay-tv) platform (U-verse) platforms, among others.

In a response, AT&T’s board said it would review the letter, adding the company has already implemented many of the changes outlined by Singer.

The letter comes following the surprise retirement of John Donovan, CEO of AT&T Communications, and the Sept. 3 promotion of Stankey to COO.

Singer, in the letter, said he remains “cautious on the benefits of the [Time Warner, DirecTV] combination.”

Indeed, AT&T’s rollout of standalone online TV service, DirecTV Now, has seen the platform jettison hundreds of thousands of subscribers after it began ending the service’s initial $34.99 monthly fee. The service has been rebranded to AT&T TV.

The telecom has big plans for the launch of HBO Max, a SVOD platform intended to compete with Netflix, Amazon Prime Video, Disney+ and Apple TV+, among others.

At the same time, Max would appear to signal the end for HBO Now, the four-year-old SVOD service with less than 6 million subscribers.

WarnerMedia Re-Opens Tsujihara Inquiry Regarding Inappropriate Behavior

WarnerMedia has re-opened an internal investigation involving Kevin Tsujihara, chairman and CEO of Warner Bros., regarding allegations he traded sex for auditions with an aspiring actress.

Tsujihara, the former home entertainment executive who became CEO of Warner Bros. in 2013 when the studio was owned by Time Warner, had been previously investigated for inappropriate behavior involving British actress Charlotte Kirk.

That investigation reportedly found no inappropriate influence by Tsujihara. Kirk did land small roles in How to be Single (2016) and Ocean’s 8 in 2018, in addition to auditions for other Warner movies.

When details of the affair, including efforts by Tsujihara, director Brett Ratner and business partner James Packer to placate Kirk were made public March 6 by The Hollywood Reporter, WarnerMedia re-opened the investigation.

“Whenever we receive new allegations, it is our standard practice to conduct an appropriate investigation. And that is what we will do here,” a WarnerMedia representative said in a media statement.

Lawyers for both Kirk and Tsujihara deny the CEO exerted any preferential treatment or pressure on behalf of the actress.

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The inquiry comes as Tsujihara had his role at WarnerMedia expanded to include oversight of Cartoon Network, Adult Swim, Boomerang, Otter Media, Turner Classic Movies and WarnerMedia’s licensed consumer products.

Indeed, Tsujihara’s long history in digital content distribution dates back to the dotcom era where he spearheaded Warner’s short-lived Entertaindom platform.

In an interview 10 years ago, Tsujihara questioned traditional distribution in a rapidly evolving digital age. He pushed for early electronic sellthrough movie release dates ahead of DVD, arguing EST margins were better than packaged-media’s cash cow status. And he advocated for early access to theatrical movies in the home at a premium price, otherwise known as PVOD.

It’s a progressive mindset that over time convinced Time Warner CEO Jeff Bewkes to put Tsujihara in charge of Warner Bros., arguing his digital vision and recognition of alternative distribution channels outweighed the status quo at the venerable film studio.

A legacy Tsujihara nurtures to this day spearheading stacking rights of Warner TV content to distribution partners across the ecosystem.

“At Warner Bros., what we want to do is take the show and put it on the most appropriate platform,” Tsujihara told in an interview.

Tsujihara was a big supporter of the studios banding together to create a digital storage locker for movies, first championing UltraViolet and later joining the other majors, sans Paramount, in Movies Anywhere — a platform that links to seven online retailers, including iTunes, Amazon Instant Video, Vudu, Comcast’s Xfinity Store, Google Play, Microsoft Movies & TV and FandangoNow.

In an interview last month with the Los Angeles Times, Tsujihara reiterated continued support for PVOD, despite the fact most exhibitors and Wall Street analysts consider it a failed venture.

“It’s about finding the right platform for the content,” he said. “If consumers want to be able to experience [a movie] in the home sooner, then they should have that. That’s where we’d like to see the movie business go.”

Former Time Warner CEO Richard Parsons Named CBS Interim Chairman of the Board

CBS Sept. 25 announced it has named former Time Warner CEO Richard Parsons interim chairman of the board of directors – replacing chairman/CEO Les Moonves, who exited the company following allegations of inappropriate behavior in the workplace. The board unanimously approved the appointment, which was recommended by the board’s nominating and governance Committee.

“Dick Parsons has a combination of deep industry knowledge and unmatched corporate and board experience,” Candace Beinecke, chair of the nominating and governance committee, said in a statement. “We are fortunate to have Dick in this leadership role.”

Parsons, who stepped down as CEO of Time Warner in late 2007 – replaced by Jeff Bewkes  – has worn many corporate hats (including Citigroup) in a lengthy career that included a stint as interim CEO of the Los Angeles Clippers NBA franchise after former owner Donald Sterling was forced out following allegations of racist behavior.

CBS also announced that Bruce Gordon and William Cohen, who have served on the board of since CBS became a stand-alone public company in 2006, have decided to step down from their posts to focus on other personal and professional priorities. The board unanimously adopted a resolution to express its thanks and appreciation to Gordon and Cohen for their long and dedicated service to CBS, and to wish them well on their future endeavors.

Departed Turner CEO John Martin Was a Friend of Home Entertainment

NEWS ANALYSIS – Lost in the rapid-fire of events at the closure of AT&T’s $85 billion purchase of Time Warner was the departure of John Martin, CEO of Turner.

AT&T Entertainment CEO John Stankey, who became CEO of renamed WarnerMedia, replacing retiring CEO Jeff Bewkes (at former Time Warner), made the announcement June 15 in a memo to employees.

WarnerMedia includes Warner Bros., HBO and Turner (TBS, TNT, CNN, Turner Sports, Cartoon Network, among others).

Martin, who was also former CFO of Time Warner, was appointed CEO of Turner in 2014 by Bewkes. A proponent of the merger, Martin also once called AT&T’s online TV platform DirecTV Now, “a money-losing business,” – a comment not likely ignored by his new corporate bosses.

“This initial Turner organization structure will allow me to work more closely with more Turner leaders and accelerate my personal learning of the business as we define our shared priorities across the company,” said Stankey regarding Martin and other Time Warner executives’ exits.

Regardless, Martin was a long-time advocate of home entertainment – including UltraViolet and electronic sellthrough of content.

In 2010, Martin backed the short-lived rollout of premium VOD, which would allow consumers to rent a new-release theatrical movies in the home within days of its box office debut.

In 2012, on a fiscal call, Martin showed a sense of humor when he said he was encouraged by “recent signs” of stabilization in home entertainment, with total consumer spending “actually flat” for the year.

He chastised the industry (i.e. Disney) for not rallying around UltraViolet as the primary cloud-based content ownership platform.

“Look, challenges still exist [in home video],” Martin told a separate investor event, adding that secular challenges had mandated the industry to embrace alternative distribution strategies such as street-date transactional video-on-demand and premium VOD, among others.

“Warner Bros. has been the leading studio at trying to move toward embracing new technology, advantaging channels that are higher margin and disadvantaging those channels that are lower margin,” he said.

Martin believed it was that mindset that pushed Warner to spearhead rollout of UltraViolet. He said adoption of the platform was “not where we want it to be,” but that the studio took the leadership position at the time when ongoing technological challenges mandated action.

“Somebody’s got to try and move forward because the industry has to move more quickly to embrace these higher-margin opportunities,” he said.

Warner earlier this year joined Disney and other studios (except Lionsgate and Paramount Pictures) in support of the latter’s rebranded Movies Anywhere platform.


Jeff Bewkes’ Legacy: More Than Surviving the ‘Albanian Army’

NEWS ANALYSIS — When a federal judge greenlighted AT&T’s $85 billion acquisition of Time Warner, Jeff Bewkes, 10-year CEO of the media giant that includes Warner Bros., Turner (TBS, TNT, CNN, Turner Classic Movies, Cartoon Network), HBO and Cinemax, officially became a lame duck.

Upon consummation of the deal — provided the Justice Department doesn’t appeal — Bewkes will help transition John Stankey, president of AT&T’s entertainment group, into his senior executive position while reportedly getting a $95 million golden parachute for his efforts.

While hardly needing the money — Bewkes saw his 2017 compensation balloon to $49 million — the 1974 Yale graduate departs following a 39-year career at Time Warner that included restructuring media operations, downsizing New Line Cinema, and selling AOL and Time Warner Cable, among other initiatives.

Former top gun at HBO, Bewkes greenlighted the network’s early hits “The Sopranos” and “Sex in the City.” Replacing Richard Parsons as CEO of Time Warner in 2008, Bewkes was an early advocate turning The Hobbit and “Harry Potter” novels into movies followed up by “Game of Thrones” on HBO.

Known for his dry sense of humor, the 66-year-old Bewkes most-famously survived comparing burgeoning media meteor Netflix in 2010 to the Albanian Army.

“Is the Albanian Army going to take over the world? I don’t think so,” Bewkes told The New York Times. It was a catchphrase reiterated on fiscal calls — underscoring Bewkes’ confidence (or arrogance) that Netflix needed Warner Bros.’ TV shows and movies more than it needed to coddle streaming video.

It was the same corporate mindset Blockbuster Video foolishly employed in 2000 when the home video giant turned down a 49% stake in Netflix, thinking it could do better on its own launching the short-lived Blockbuster Movie Pass service in 2011.

“If they had launched two years earlier, they would have killed us,” Netflix co-founder Reed Hastings later told The Wrap.

But it was more than streaming to Bewkes. He believed content ownership — both physical and digital — should trump rental. And SVOD was just rental on steroids. While former CEO Parsons notoriously bragged it would be “cold day in hell” before he entered a video store, Bewkes lauded the rollout of UltraViolet — the cloud-based digital content platform that has seen many of its major studio partners, Warner included, migrate to the competing Movies Anywhere platform.

“There’s a niche shift to rental, kiosk rental, that’s less profitable,” Bewkes told a Wall Street confab in 2012. “[We need to] make [content] ownership more easy and valuable, which we haven’t so far succeeded to do. One way or another, in the long run, we think it’s a business that can grow, although it isn’t growing as fast as television.”

History is filled with what-ifs and “woulda-coulda-shoulda” scenarios that have undermined lesser executives. Not Bewkes.

As Netflix, Amazon Prime Video and Hulu have reshaped the media distribution, Bewkes simply changed the narrative.

In 2013, Bewkes picked Warner Bros. Home Entertainment boss Kevin Tsujihara over other more-established studio executives to run Warner Bros., replacing Barry Meyer. Bewkes believed Tsujihara’s digital expertise (he once headed short-lived digital platform during the dotcom era) would make a better fit going forward.

In 2014, HBO for the first time licensed catalog programming to Prime Video — a move Bewkes said meant getting top dollar for programming with little marginal value on the open market. Three years later, HBO would pull the shows from Amazon for its own SVOD platform, HBO Now.

In 2016, Time Warner acquired a 10% stake in Hulu for $583 million, joining majority owners 21st Century Fox, Disney and Comcast in the SVOD (and online TV) platform that continues to hemorrhage money.

Bewkes said the acquisition would help level the SVOD playing field while increasing “our company’s exposure to the secular growth in over-the-top.”

Indeed, streaming video is now part of Bewkes’ mental resumé, if not more.

“It is the legacy that I have been the steward of,” he told The Times.