WarnerMedia CEO John Stankey Blasts HBO Europe Sale Speculation

Following AT&T’s $85 billion acquisition of Time Warner, the company was left with more than $170 billion in debt. Senior executives have publicly stated that reducing  the company’s debt load by $20 billion is a primary goal in 2019.

That apparently does not include selling off HBO operations in Europe.

WarnerMedia CEO John Stankey has denied a Financial Times report suggesting the unit responsible for “Game of Thrones” and other programming was being sold.

HBO Europe has about 10 million subscribers across Scandinavia, Spain and Poland.

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“We normally do not comment on speculation, but when a news outlet is advised that their reporting is factually incorrect and report it anyway, we feel compelled to set the record straight,” Stankey said in a statement. “There is no truth whatsoever to the Financial Times’ story saying AT&T is or has considered selling HBO Europe. It’s completely baseless and inaccurate. HBO Europe is a valuable asset for our growth plans in Europe.”

Regardless, HBO has seen high-level staffing changes, including the departures of longtime CEO Richard Plepler, chief digital officer Diane Tryneski, chief revenue officer Simon Sutton, Kary Antholis, president of HBO miniseries and Cinemax programming, Rebekka Rockafeller, SVP of digital products, and Gilman Wong, VP of digital products and chief architect.

Earlier this year, AT&T sold office space in Manhattan, N.Y. in a deal reported to top $2 billion.

WarnerMedia reportedly is leasing back the 1.5 million square feet of office space at 30 Hudson Yards, which includes an observation deck on the 100thfloor — the highest in the Western Hemisphere.

 

WarnerMedia Creating Diversity/Inclusion Executive Position

WarnerMedia is set to create a new executive position focusing on diversity and inclusion issues. While no one has yet been hired to become the former Time Warner company’s first chief diversity and inclusion officer, the move was reportedly outlined in a March 20 staff memo from CEO John Stankey.

“During the Global Town Hall meeting [last September], I was asked about the lack of women and diversity on stage,” wrote Stankey. “I understand how important this is. In order for WarnerMedia to be the best company we can be, we have to include diverse voices at every level of our business. And while we already have some of the most talented women and diverse executives in the industry, we have more work to do.”

The chief diversity and inclusion officer will report directly to Stankey.

John Stankey

The new executive position follows restructuring among WarnerMedia, that has seen bosses at Warner Bros., HBO and Turner depart — including the former’s CEO Kevin Tsujihara exit March 18 following a story in The Hollywood Reporter about his affair with actress Charlotte Kirk.

Warner Bros. is now headed by an interim management team consisting of Toby Emmerich, Warner Bros. Motion Picture Group chairman, Peter Roth, Warner Bros. Television Group president and CCO; and CFO Kim Williams.

“There is no silver bullet to get us to where we need to be, but the leaders across our company are committed to working together to make the changes necessary as we build on our foundation towards greater progress,” Stankey wrote. “I believe that our new structure will enable us to do even more to achieve these objectives.”

 

 

WarnerMedia Names Interim Warner Bros. Management Team Following Tsujihara Ouster

Kim Williams

WarnerMedia has named an interim management team to run Warner Bros. following the March 19 departure of studio chairman/CEO Kevin Tsujihara, who left following allegations of sexual impropriety with a young actress.

Peter Roth

The team consists of Toby Emmerich, chairman of the motion pictures group, Peter Roth, CCO and president of Warner Bros. Television, and CFO Kim Williams, according to Variety, which cited sources familiar with the situation.

The team will run daily operations at the studio while WarnerMedia CEO John Stankey seeks a new studio boss. Media reports have suggested Stacey Snider, outgoing CEO at 20th Century Fox Film Corp., as a possible candidate.

Toby Emmerich

Tsujihara’s exit comes following a second internal investigation into allegations the CEO secured screen roles and auditions for aspiring actress Charlotte Kirk, with whom the married executive had an affair.

Details of the 6-year-old affair — including text messages — were made public by The Hollywood Reported earlier this month.

 

 

Tsujihara Out at Warner Bros.

Kevin Tsujihara is stepping down as chairman and CEO of Warner Bros. Entertainment amid allegations of sexual improprieties.

“Over the past week and a half, I have been reflecting on how the attention on my past actions might impact the company’s future. After lengthy introspection, and discussions with John Stankey over the past week, we have decided that it is in Warner Bros.’ best interest that I step down as chairman and CEO,” said Tsujihara in a statement reported by Variety, adding, “My continued leadership could be a distraction and an obstacle to the company’s continued success.”

“It is in the best interest of WarnerMedia, Warner Bros., our employees and our partners for Kevin to step down as chairman and CEO of Warner Bros.,” WarnerMedia CEO John Stankey said in a statement, according to the Variety report. “Kevin has contributed greatly to the studio’s success over the past 25 years and for that we thank him. Kevin acknowledges that his mistakes are inconsistent with the company’s leadership expectations and could impact the company’s ability to execute going forward.”

Stankey stated an interim leadership plan would be announced to staff March 19.

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Tsujihara March 8 had issued an email apology to staff members for his behavior regarding allegations he was having an extramarital affair with aspiring actress Charlotte Kirk, and that he helped her land roles and auditions to keep the tryst secret.

The affair, which reportedly occurred shortly after Tsujihara became studio chief in 2013, was disclosed March 6 by The Hollywood Reporter.

The story prompted Warner Bros. parent company WarnerMedia, the AT&T subsidiary created in the wake of its $85 billion acquisition of Time Warner, to re-open an investigation into Tsujihara regarding the allegations. A WarnerMedia management shuffle March 4, just prior to the article, had Tsujihara taking on additional duties at WarnerMedia involving programming for children and young adults.

“I deeply regret that these personal actions have caused embarrassment to the company and to all of you,” Tsujihara wrote in the March 8 email. “I realized some time ago you are right to expect more from me and I set a course to do better.”

Bob Greenblatt Named Chairman of WarnerMedia’s Entertainment Unit; Kevin Tsujihara’s Role Expanded

As expected, AT&T March 4 named former NBC Universal executive Bob Greenblatt chairman of WarnerMedia’s entertainment and over-the-top video businesses. Greenblatt reports to WarnerMedia CEO John Stankey.

Greenblatt, who left NBC Universal six months ago, joins the former Time Warner company following last week’s exits of HBO boss Richard Plepler and Turner’s David Levy.

Greenblatt oversees HBO, TNT, TBS, truTV, and the company’s over-the-top video business. Kevin Reilly remains in charge of Turner programming, in addition to spearheading WarnerMedia’s pending streaming video service.

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Meanwhile, longtime home entertainment executive Kevin Tsujihara remains chairman/CEO of Warner Bros., while adding responsibilities involving children and young adult viewers.

Specifically, Tsujihara will now also oversee Cartoon Network, Adult Swim, Boomerang, Otter Media, Turner Classic Movies and WarnerMedia’s licensed consumer products.

CNN president Jeff Zucker adds the title chairman of WarnerMedia news and sports, while Gerhard Zeiler transitions from president of Turner International to chief revenue officer at WarnerMedia.

“We have done an amazing job establishing our brands as leaders in the hearts and minds of consumers,” Stankey said in a statement. “Adding Bob Greenblatt to the WarnerMedia family and expanding the leadership scope and responsibilities of Jeff, Kevin and Gerhard — who collectively have more than 80 years of global media experience and success — gives us the right management team to strategically position our leading portfolio of brands, world-class talent and rich library of intellectual property for future growth.”

HBO Boss Richard Plepler Departs

Longtime HBO executive Richard Plepler is leaving the pay-TV channel, following a series of management changes underway at WarnerMedia that reportedly include bringing in former NBC Universal executive Bob Greenblatt as a senior executive reporting to CEO John Stankey.

Plepler, who joined HBO in 1992, helped greenlight myriad hits for the platform, including “Game of Thrones,” “True Detective,” “Veep” and “True Blood.” He also oversaw the launch of HBO Now, the standalone subscription streaming service.

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“Hard as it is to think about leaving the company I love, and the people I love in it, it is the right time for me to do so,” Plepler wrote in a memo to staff as reported by Variety. “In the past weeks, I’ve thought a lot about the incredible journey of this company in the nearly 28 years that I have been blessed to be here. It’s a journey of great pride and accomplishment because so many of you, and many others before us, have made HBO a cultural and business phenomenon.”

Plepler’s departure comes 48 hours after a federal appeals court upheld AT&T’s $85 billion acquisition of Time Warner. It also comes a day after AT&T CFO John Stephens told an investor group that the telecom’s senior management did not wish to upend the culture at the entertainment unit that includes HBO, Warner Bros. and Turner with further personnel changes.

“They [had] a CFO [Howard Averill] and we have a CFO. Those kinds of head-counting synergies have been achieved,” Stephens said.

Of course, the handwriting was on the wall ever since AT&T first closed the acquisition last summer. Stankey, in a town hall meeting with employees and Plepler, strongly intimated that the status quo at HBO would not continue.

The executive said he sought to make HBO programming habitual in a market driven by portable devices that capture consumer attention “every 15 minutes.”

“It’s going to be a tough year,” Stankey said at the time. “It’s going to be a lot of work to alter and change direction a little bit.”

 

WarnerMedia Streaming Service Eyeing Original Content in 2020

WarnerMedia is launching a proprietary over-the-top video platform in the fourth quarter featuring catalog content from subsidiaries HBO, Warner Bros. and Turner.

The unnamed service plans to roll out original fare beginning in 2020, according to Kevin Reilly, president of TBS, TNT and head of content and strategy at the new service.

Speaking Feb. 11 at the Television Critics Association annual winter tour in Los Angeles, Reilly said the service would be beta-launched featuring catalog fare from Warner, Warner Bros. Television, New Line Cinema, HBO and Turner subsidiaries such as Adult Swim, The CW, and Cartoon Network, among others.

“Our beta will not have original programming, but we will introduce it in 2020,” Reilly said. “Expect it in all the verticals: kids and family, teens up to adult.”

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While traditional media and OTT services scramble to produce differentiating distribution platforms featuring original content, WarnerMedia intends to walk the fine line between licensing and restricting programming to third-party services.

WarnerMedia made news last year renewing the coveted “Friends” catalog to Netflix for one year for a reported $100 million. It was a move that contradicted in part CEO John Stankey’s stated mission to restrict proprietary programming to Netflix, Amazon Prime Video and other services not named Hulu.

WarnerMedia is a co-owner of Hulu with Disney, Fox and Comcast.

“The dynamic those [SVOD] incumbents are playing with are still 75% to 80% of viewing tonnage is that licensed content,” Stankey told analysts last November. “Their pressure is they’ve got to make this pivot to get people off of viewing content that sits in our library, or the Disney library, and get it onto their own.”

Reilly concurs, saying he expects the “crown jewels” of Warner programming to eventually migrate predominantly to the new service.

“We’re not pulling it away [from third parties] but it certainly is something we’re looking to do,” he said. “I think for the most part sharing destination assets [like ‘Friends’] is not a good model. They should be exclusive to the [new] service.”

The executive said the service would also feature shows such as “Titans,” “Doom Patrol” and pending “Swamp Thing,” heretofore exclusive to DC Universe, the SVOD service launched last year.

“There is no piece of content in the Warner Media portfolio that will not be looked at for the service,” Reilly said. “That doesn’t mean every piece of content will end up on the service or end up on the service permanently. Content goes through a natural life cycle at which it benefits at times being off a platform or being on a new platform.”

 

WarnerMedia Launching Tech/Content Incubator

WarnerMedia Jan. 22 announced plans to launch WarnerMedia Innovation Lab, an incubator that will combine emerging technologies with content from HBO, Warner Bros., Turner and Otter Media, to create new consumer experiences and businesses.

The New York-based lab is designed to forge collaborations across WarnerMedia business units and corporate parent AT&T, as well as between key corporate partners and developers of emerging new technologies.

In an era of Netflix, Amazon Prime Video and emerging ad-supported VOD, studios and content creators are looking not only at direct-to-consumer distribution, but content licensing deals and original productions for proprietary brands and third parties.

For example, WarnerMedia just renewed a streaming distribution deal with Netflix for reruns of “Friends,” while earning two indirect Golden Globe awards for “The Kominsky Method,” which it created for Netflix.

“Our goal is to accelerate innovation around how our content can thrive and grow within emerging formats and platforms,” WarnerMedia CEO John Stankey said in a statement. “By taking advantage of AT&T’s technological capabilities we are literally creating a next-generation playground for our creative, tech and strategy executives and key business partners.”

The innovation lab will meld core competencies in areas ranging from the “Internet of Things” (IoT), AI and machine learning to virtual reality and mixed reality with WarnerMedia’s IP and creative talent.

Initial areas of exploration are expected to include AT&T’s 5G infrastructure offerings to develop, deliver and deploy new immersive consumer content experiences in the form of AR/VR/MR/gaming offerings, enhancing real-time interactivity and connectivity.

The lab will also look to combine data and insights from across AT&T’s more than 300 million direct-to-consumer relationships across wireless, video and broadband services with WarnerMedia’s premiere and engaging content, in order to harness the potential of dynamic content, innovative advertising formats and delivery using Artificial Intelligence and Deep Learning research.

One of WarnerMedia’s initial partners will be the NBA. Together, they plan to explore areas including utilizing AT&T’s IoT infrastructure, connected car partners and connected environments across stadiums, airports and cities to re-imagine localized content and fan experiences, as well as utilizing a vast array of creative talent to bring the immersive game experience beyond the court.

“We are always exploring what is next for sports media and what it means for the future NBA experience,” said NBA Commissioner Adam Silver. “This collaboration with WarnerMedia will help identify cutting edge ways to use technology to deliver more immersive experiences to NBA fans.”

Turner, a division of WarnerMedia, and the NBA have routinely driven innovation within the industry by providing fans with novel and engaging experiences. The two organizations will collaborate to further help shape the future of the consumer experience around live sports and entertainment.

Turner and the NBA jointly-manage NBA Digital, the league’s cross-platform portfolio of digital assets, including NBA TV, the NBA app, NBA.com, NBA League Pass and NBAGLeague.com.

Additionally, the Lab will foster further collaboration with WarnerMedia’s Turner division and Xandr, AT&T’s new advertising company. Together, Xandr and Turner are working together to redefine the consumer advertising experience and improve the relevancy of advertising, fueled by data and content connections.

The lab will be led by Jesse Redniss, who will add to his responsibilities as Turner’s EVP of data strategy and product innovation. A marketing and creative product development veteran, Redniss will oversee the lab’s creative priorities and objectives.

“The future of consumer experience will be personalized, both participatory and passive at the same time, while also dynamic based on how viewers want to receive and engage within their media content journey,” said Redniss.

He will work with operating executives across all AT&T’s entities and will be responsible for identifying partners in the creative, emerging technology, agency and consumer brand worlds.

Existing projects include Turner’s VR short film for TBS’ “Final Space,” a partnership between Warner Bros. and Magic Leap to develop a mixed reality theatrical trailer experience for blockbuster Fantastic Beasts: The Crimes of Grindelwald, and a partnership between Warner Bros. and Intel to demonstrate a first-of-its-kind concept car that transports guests to Gotham City, home to DC Comics’ Batman, showcasing the future of immersive entertainment in autonomous vehicles.

 

 

Stankey Discusses Advantages of Leveraging Licensed Content

As Disney and WarnerMedia ready flagship over-the-top video platforms for launch in late 2019, SVOD services such as Netflix are scrambling to minimize their risk to third-party content obligations.

Witness Netflix’s decision to cancel “Daredevil,” which was foreshadowed last month by the SVOD behemoth’s termination of original Disney/Marvel series “Iron Fist,” and “Luke Cage.”

Netflix’s exclusive pay-TV access to Disney theatrical titles ends this year.

While Netflix hinted that more adventures of Daredevil could eventually materialize in other mediums, the service took the high road saying — in a statement — that the three existing seasons would remain on the platform “for years to come,” while the Daredevil character “will live on in future projects for Marvel.”

To John Stankey, CEO of WarnerMedia, which owns Warner Bros., HBO and Turner, the move by Netflix to distance itself from third-party license agreements in favor of proprietary fare underscores ongoing changes in the OTT video landscape.

“A lot of those incumbents [i.e. Netflix] should expect that their libraries are going to get a whole lot thinner,” Stankey said Nov. 29 on AT&T’s analyst day event. “They are not going to be the same size they are today.”

Indeed, WarnerMedia and Disney can enhance the consumer value of their pending SVOD services simply by denying their content brands to Netflix & Co. — in effect depriving competing OTT services streaming access to valuable IP.

Stankey said the challenge for Netflix and other OTT services is to get their subs to pivot away from licensed content (about 70%, according to Stankey) to proprietary original fare. Regardless, Stankey said WarnerMedia wins as both a producer and distributor of original content.

“Maybe it sits in our library and maybe it sits in Disney/Fox,” he said.

The executive contends OTT video platforms will be structured differently in the next couple of years, including incorporating third-party content providers looking to piggyback on AT&T/WarnerMedia’s scale.

“I think structurally that is likely what will happen,” he said. “I believe we can play in that world going forward.”

 

AT&T Looking to Sell Off Hulu Stake

When AT&T acquired Time Warner for $85 billion, the purchase price pushed the telecom’s net debt skyward to about $170 billion by the end of the year.

Corporate debt (debt-to-pre-tax earnings ratio) is a relative thing. Too little and investors worry a company isn’t maximizing revenue potential. Too high and concerns about financing the debt and or worse loom into the picture. Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts.

AT&T will end 2018 with a debt ratio of 2.8.

For CFO John Stephens, who is tasked with decreasing that ratio, the solution involves scrutinizing internal overhead costs, reducing redundancies and liquidating non-core assets — such as WarnerMedia’s 10% stake in Hulu.

WarnerMedia, which includes Warner Bros., HBO and Turner, acquired the Hulu stake in 2016 for $583 million when it was Time Warner. The SVOD and online TV platform with 20 million subscribers is co-owned by Disney, Fox and Comcast and reportedly valued at more than $9 billion.

With WarnerMedia planning to launch proprietary SVOD service in late 2019, co-owning a rival service makes little sense.

Indeed, eliminating corporate headquarters, minority investments in Sky Mexico and Hulu, among other options, could generate AT&T upwards of $8 billion in cash, according to Stephens.

“If we’re successful in that, that would bring us down to that 2.5 [debt ratio] range [by the end of 2019],” Stephens said on AT&T’s Nov. 29 analyst day event. “We’re going to focus on getting that done. With our [$500 billion] balance sheet, we are in a very good position.”

The CFO contends AT&T will have free cash flows approaching $12 billion at the end of the year, which he said will be applied to reducing the debt. The company expects to generate $26 billion in free cash flow in 2019.

AT&T expects to generate $1.5 billion in cost savings (corporate overhead, procurement purchasing, marketing, etc.) and another $1 billion in revenue savings (churn reduction, cross-selling products) by 2021, including $700 million in savings by the end of 2019, $2 billion by the end of 2020.

“People who know our company, know we’re pretty good with cost synergies,” Stephens said. “Sharing assets and capabilities across the business, we can learn from them and WarnerMedia can hopefully learn from us.”