WarnerMedia Parent AT&T Seeks $5.5 Billion Loan; Says Financial Position Remains Strong

With a high-profile subscription streaming video platform HBO Max launching next month, and many of its business segments at WarnerMedia Entertainment idle due to the coronavirus pandemic, AT&T April 7 announced a $5.5 billion term-loan agreement with 12 banks to provide additional financial “flexibility” to what it characterized as an “already strong cash position.” The loans are pre-payable without penalty.

The telecom said it had about $12 billion in cash on hand at the end of 2019. It also ended last year with about $170 billion in debt — much of it accrued from the $85 billion acquisition of Time Warner, whose assets include Warner Bros., HBO and Turner.

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In a regulatory filing, AT&T said the “strength and relevance” of its core subscription businesses (telecom and pay-TV) would provide enough cash from operations to support network investments, dividend payments and debt retirement, as well as the ability to invest in business opportunities that arise as the economy recovers.

The telecom said it expects to generate $2 billion from the expected closing later in 2020 from the previously announced divestiture of television channels in Bulgaria, Czech Republic, Romania, Slovakia and Slovenia., as well as additional proceeds from a number of other real estate and cell tower sales.

The company expects to close the sale of its Puerto Rico and U.S. Virgin Islands operations later this year. AT&T also has a $15 billion revolver in place but said it sees need or plans to use it in 2020.

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While it suspended a stock repurchase program, AT&T said it “looks forward” to continuing to pay a quarterly dividend to shareholders as it has for 36 years. On March 27, the board of directors declared a dividend payable on May 1, to stockholders of record of its common and preferred shares at the close of business on April 9.

The telecom also announced it hold its 2020 annual meeting on April 24 (10 a.m. ET) via webcast only.

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.

WarnerMedia Hires Ex-Hulu Boss Jason Kilar as CEO

WarnerMedia Entertainment April 1 named Jason Kilar as its CEO. Kilar, former founding CEO of Hulu, begins his position on May 1, reporting to AT&T COO John Stankey.

Kilar’s resume involving streaming video will be key as WarnerMedia, whose assets include Warner Bros., HBO and Turner, launches HBO Max in May. He ran Hulu from 2007 to 2013.

Indeed, with Max the cornerstone of WarnerMedia’s distribution focus in the near term as theatrical remains shuttered due to the coronavirus, Kilar’s experience launching Hulu will be key.

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“Our team led by Bob Greenblatt, Ann Sarnoff, Gerhard Zeller and Jeff Zucker has done an amazing job establishing our brands as leaders in the hearts  and minds of consumers,” Stankey said in a statement. “Adding Jason to the talented WarnerMedia family as we launch HBO Max in May gives us the right management to strategically position our leading portfolio of brands, world-class talent and rich library of intellectual property for future growth.”

Kilar, 48, was CEO of Hulu from its launch in 2007 until 2013. Before that, he held several leadership positions at Amazon from 1997 to 2006, including SVP of Worldwide Application Software.

His voluntary departure from Hulu surprised analysts, including Richard Greenfield, now with Lightshed Partners. “He’s done an amazing job!” Greenfield wrote at the time.

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Miller Tabak analyst David Joyce “assumed” Kilar would stay at Hulu during the transition, while portfolio manager Larry Haverty thought Kilar could move on to “bigger things.”

Instead, Kilar launched video streaming service Vessel, a wannabe YouTube service, which enabled viewers for a $3 monthly fee, exclusive access to new videos 72 hours before they were released in other channels. Vessel was acquired by Verizon, which shuttered the platform in 2016.

Additionally, Kilar served as a board member at DreamWorks Animation (2013-16) and Univision Communications (2016-20). He holds a bachelor’s degree in journalism and business from the University of North Carolina at Chapel Hill, and an MBA from Harvard Business School.

WarnerMedia Latest to Establish $100M Employee Virus Relief Fund

WarnerMedia has joined a number of entertainment companies  creating funds for employees and related staff affected by the coronavirus pandemic. The parent to Warner Bros., HBO and Turner, set up a $100 million fund to assist production workers and others idled by the shutdown in Hollywood.

“We are stepping up with a commitment of more than $100 million to assist team members of those productions during this time. And as things evolve, we’ll continue to evaluate how we can best respond to the challenges we face as an industry as a result of this pandemic,” CEO John Stankey said in a March 27 memo to staff, as first reported by Variety.

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The move follows similar actions taken by Netflix ($100 million), NBCUniversal ($150 million) and others in the entertainment industry, citing concern for the “health and safety of employees, cast, crew and community” as a virtual shutdown of productions and theater closings has ground most aspects of the ecosystem to a halt.

The National Association of Theatre Owners previously pledged $1 million to a fund to assist laid-off theater workers. Actor Ryan Reynolds and his wife, Blake Lively, are donating $1 million to food banks in the U.S. and Canada, while New Orleans Saints quarterback Drew Brees and his wife donated $5 million to coronavirus aid groups in Louisiana.

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The International Alliance of Theatrical Stage Employees — which represents more than 150,000 members employed in stagecraft, motion picture and television production — earlier this month pledged a combined $2.5 million to the Actors Fund, the Motion Picture and Television Fund, and the Actors Fund of Canada.

“These charities have been assisting and supporting IATSE members and entertainment industry workers for a very long time,” Matthew D. Loeb, international president of IATSE, said in a statement. “They understand the needs of these workers and are perfectly situated to act as our partners to help those experiencing hardship caused by the current health crisis.”

‘Friends’ Cast to Reunite for Special on HBO Max

The “Friends” cast will be reuniting exclusively for an untitled unscripted special for HBO Max, WarnerMedia’s direct-to-consumer offering debuting in May 2020.

The subscription streaming service will cost $14.99 a month.

Series stars Jennifer Aniston, Courteney Cox, Lisa Kudrow, Matt LeBlanc, Matthew Perry, and David Schwimmer will return to the comedy’s original soundstage, Stage 24, on the Warner Bros. Studio lot in Burbank for a celebration of the show. The unscripted cast reunion special, along with all 236 episodes of the Emmy-winning series, will be available to subscribers at the launch of HBO Max.

“Guess you could call this the one where they all got back together — we are reuniting with David, Jennifer, Courteney, Matt, Lisa, and Matthew for an HBO Max special that will be programmed alongside the entire Friends library,” said Kevin Reilly, chief content officer, HBO Max and president, TBS, TNT, and truTV, in a statement. “I became aware of ‘Friends’ when it was in the very early stages of development and then had the opportunity to work on the series many years later and have delighted in seeing it catch on with viewers generation after generation. It taps into an era when friends — and audiences — gathered together in real time and we think this reunion special will capture that spirit, uniting original and new fans.”

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Ben Winston will direct the special and will executive produce along with “Friends” executive producers Kevin Bright, Marta Kauffman and David Crane. Aniston, Cox, Kudrow, LeBlanc, Perry, and Schwimmer will also executive produce the special.

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To get caught up on original “Friends” episodes, sister WarnerMedia network TBS recently announced that for the next four weeks every episode of “Friends” will air on TBS and livestream on the TBS app, weekdays from 10 a.m. to 4 p.m. Additionally, the network has curated an experience for fans offering the best of the series on their digital platforms.

WarnerMedia Pivots HBO Content From Cable to Streaming

WarnerMedia Entertainment is making significant strategic adjustments ahead of the launch of HBO Max this May, diverting resources from its cable networks and investing instead in a rapidly growing number of HBO Max original commissions.

That, according to new data from Ampere Analysis.

By the fourth quarter 2019, streaming commissions represented 73% of WarnerMedia’s new TV projects compared to 25% from its cable networks, down from over 90% in Q4 2018.

The rapid change illustrates the relegation of cable networks behind the strategically important streaming services. Streaming has grown from 7% of commissions in Q4 2018 to 73% in Q4 2019.

“Warner’s pivot towards an increasingly HBO Max-first approach to commissioning is not only apparent in the number of new projects in development, but also in the types of content being commissioned,” analyst Fred Black wrote in a note.

Black said Warner’s cable properties commissioned only four Sci-Fi & Fantasy titles in 2019, all at HBO, while its streaming properties greenlit 12 titles.

“This is the clearest sign yet that the home of ‘Game of Thrones’ will in the future play second fiddle to HBO Max when it comes to some of Warner’s highest-profile genre commissions,” Black said.

WarnerMedia Entertainment is the third-largest commissioner of new content titles among domestic cable groups, behind only Discovery and ViacomCBS, according to Ampere.

Ampere said Warner’s cable properties remained a top-five U.S. cable network commissioner in each quarter of 2019. However, during the year, the number of cable commissions declined each quarter as activity was ramped up at HBO Max. Cable commissions were down 37% in Q4 2019 versus Q4 2018.

Meanwhile, commissioning activity for Warner’s streaming channels (HBO Max and DC Universe) matched its cable networks for the first time in August 2019 – at four apiece. Overall, Warner is investing heavily in content. The company made more than double the number of commissions in Q4 2019 (63 titles) as it did in Q4 2018 (29 titles).

The company was the largest cable commissioner of scripted comedy and second largest cable commissioner of documentaries in 2019.

 

Warner Bows New Feature Production Arm Warner Max for Streaming Service

Warner Bros. has unveiled Warner Max, a new film label that will serve as the feature production arm of upcoming SVOD service HBO Max.

“This unique joint venture between one of Hollywood’s most successful movie studios and its sister company HBO Max, which launches in May, will ensure that the new platform has a steady stream of high-quality and highly curated original films,” read a WarnerMedia press release.

The new arm was announced by Ann Sarnoff, chair and CEO of Warner Bros., and Warner Media Entertainment and Direct-to-Consumer chairman Robert Greenblatt.

With an initial target of  eight to 10 mid-budget movies per year, the new joint venture will be overseen by HBO Max’s chief content officer Kevin Reilly and chairman of Warner Bros. Pictures Group Toby Emmerich, who share greenlight responsibility for Warner Max films and will work in close collaboration with senior executives Carolyn Blackwood (COO, Warner Bros. Pictures Group) and Sarah Aubrey (head of original content, HBO Max). Jessie Henderson, EVP of original feature films for HBO Max, will expand her role to serve as the day-to-day head of the label and liaison between HBO Max and Warner Bros. Pictures Group and jointly report to Aubrey and Blackwood.

Warner Max will utilize existing Warner Bros. Pictures infrastructure, including physical production.  Warner Bros. and New Line Cinema will continue to create mid-budget fare for traditional theatrical distribution, while Warner Max “will create a new pipeline for filmmakers looking to make a particular type of film or connect with a specific audience that would be best reached in the streaming environment,” according to the press release.

The first Warner Max titles will premiere on the service in 2020, and Warner Bros. will be responsible for distribution of these titles in all other media and territories beyond the HBO Max SVOD window.

“From the get-go we have been strategizing with Toby and Carolyn about HBO Max original films,” Reilly, chief content officer of HBO Max, and president of TNT, TBS and truTV, said in a statement. “We are going to deliver a collaborative and lean process for talent, make a range of quality films, and provide a platform for each of them to have cultural impact. Now, HBO Max will be home to a robust collection of the legendary Warner Bros. film library and a new slate of original Warner Max films.”

“Working with Kevin, Sarah, Jessie and their teams, we’re committed to creating dynamic and compelling films that draw on the depth and scope of the creative resources across WarnerMedia,” Emmerich said in a statement. “We’re excited to help make HBO Max a destination for both film-lovers and the creative community, while delivering a win across the entire WarnerMedia organization.”

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“Warner Bros. Pictures Group has long been the gold standard for filmmaker-driven storytelling. We are proud to be in in the features business with them and continue that legacy on our SVOD platform,” Sarah Aubrey, head of original content, HBO Max, said in a statement. “Warner Max gives us a special opportunity to continue cultivating this style of rich and diverse storytelling and it couldn’t be in better hands than with our head of features, Jessie Henderson, who’s built her career in this space.”

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“It’s been great collaborating with our colleagues at HBO Max to take full advantage of our shared strategic advantages and creative expertise to make Warner Max a competitive player in the original SVOD film space from day one,” Blackwood said in a statement.

 

HBO Max Picks Up Documentary ‘On The Record’ in First Festival Acquisition

HBO Max has acquired U.S. rights to the documentary On the Record following the film’s premiere at this year’s Sundance Film Festival. It marks the streamer’s first festival acquisition.

In the film from Impact Partners and Jane Doe Films, director/producers Kirby Dick and Amy Ziering spotlight Russell Simmons’ sexual misconduct accusers.

“The fierce determination of Drew Dixon and all of the women who bravely chose to share their stories in On the Record moved us profoundly,” Sarah Aubrey, head of original content at HBO Max, said in a statement. “I’ve been impressed with Amy and Kirby’s work over the years covering this complex subject matter, and look forward to this film finding the widest possible audience.”

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On the Record presents the story of music executive Drew Dixon (producer of hit records by Method Man and Mary J. Blige, Estelle and Kanye West, and Whitney Houston) as she grapples with her decision to become one of the first women of color, in the wake of  #MeToo, to come forward and publicly accuse hip-hop mogul Simmons of sexual misconduct. The film chronicles not only Dixon’s story, but that of several other accusers  —  Sil Lai Abrams, Sheri Hines, Jenny Lumet, Alexia Norton Jones  —  delving into the ways women of colors’ voices are all too often silenced and ignored when reporting these crimes, as well as the various cultural forces that conspire to make them reluctant to do so.

“Kirby and I are so proud to be teaming with HBO Max to give this film the outstanding platform it deserves and can’t wait for the public to see and hear the voices of these courageous women,” Ziering said in a statement.

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“Kirby Dick and Amy Ziering are national treasures,” Dan Cogan and Jenny Raskin of Impact Partners said in a statement. “We are honored that HBO Max has decided to embrace this highly-anticipated film as their first festival acquisition ever, and we are thrilled for them to share it with their new audience.”

 

AT&T Outlines How It Will Jumpstart HBO Max Subscriptions

In the rush to validate expensive forays into proprietary over-the-top video distribution, media/tech giants such as Disney and Apple have partnered with third-party vendors and/or leaned on subsidiaries to boost subscriber retention.

HBO is no different.

During AT&T’s Jan. 29 fiscal call, WarnerMedia CEO John Stankey, who is also president and COO of the telecom parent, disclosed details how company plans to support the May debut of HBO Max — the SVOD platform company executives contend is better than the competition, including Netflix.

Indeed, AT&T said it bypassed $1.2 billion in fourth-quarter ($2.8 billion in annual) revenue forgoing third-party licensing of Warner Bros. Television properties “Friends” and “The Big Bang Theory,” among other shows, in advance of the Max launch.

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AT&T is going to give Max free to existing HBO subs through DirecTV and AT&T U-verse — or about 10 million consumers. The number is significant, since that’s the tally Disney said it generated in the first 24 hours after launching Disney+, assisted in part by a promotion with Verizon affording the telecom’s data subs with a free year of service.

Apple, which reportedly already has more than 33 million Apple TV+ subs, is giving a free year of service with any new purchase of an iPhone, iPad, Mac or Apple Watch.

Meanwhile, the eight million HBO Now subs (currently paying the identical $14.99 Max fee) will be automatically eligible for a Max upgrade without cost provided they do not access the OTT service through third-party platforms such as Roku, Apple TV, Amazon Channels, Google Chromecast or Hulu, among other devices.

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AT&T will also incentivize its “highest ARPU” wireless subscribers with promotional Max offerings, in addition to foot traffic at any of the telecom’s 5,500 branded retail locations in the U.S.

“It’s a great opportunity to improve our overall churn [subscriber retention], which we’ve seen happen from giving HBO to current unlimited [wireless] customers,” Stankey said.

“With Max, we’ll offer consumers more than twice the amount of programming for the same price as HBO today,” he added.

Stankey said going forward HBO’s 34 million domestic linear subscribers should expect to see more generalized entertainment content, including unscripted reality shows, news and sports.

“It’s an important dance and choreography [with linear TV distributors] that we have to do to get right,” he said. “And we feel we’re positioned very well to make that happen.”

 

Warner Posts Uptick in 2019 Home Entertainment, Video Game Revenue

Warner Bros. Jan. 29 said fourth-quarter (ended Dec. 31, 2019) revenue for video games and related home entertainment product increased 0.2% to $565 million, from $564 million in the previous-year period. For the fiscal year, revenue ballooned 84.6% to $2 billion, from $1 billion in 2018.

The studio consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.

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Top-selling home entertainment titles included Aquaman and Fantastic Beasts: The Crimes of Grindelwald. Indeed, Aquaman was the No. 2 selling disc in 2019 behind Disney/Marvel’s Avengers: Endgame, according to the VideoScan tracking service.

Television revenue in Q4 increased 8.5% to $1.98 billion, from $1.82 billion. For the year, revenue skyrocketed 75.8% to $6.4 billion, from $3.6 billion in 2018.

Despite the critical and box office success of Joker, quarterly theatrical revenue fell 24.7% to $1.6 billion from $2 billion. For the year, box office increased 49% to $5.9 billion from $4 billion in 2018.