WarnerMedia Layoffs Are About "Refocusing," Film Schedule Remains in Flux, AT&T CFO Says

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The pandemic "is forcing us to look at new ways to distribute our content," CFO John Stephens also said during an investor conference, signaling there could be "further delays" for some film titles.

A reorganization, including major layoffs, at WarnerMedia is designed to allow the AT&T entertainment unit to refocus on streaming as a key growth opportunity, CFO John Stephens told an investor conference on Tuesday.

Speaking at the Oppenheimer Virtual Technology, Internet & Communications Conference, which was webcast, he also said the pandemic has also been "forcing us to look at new ways to distribute content," including outside cinemas, and other ways of doing business differently.

Addressing planned upcoming theatrical releases, he said, "I am not certain where those are going to go," suggesting possible "further delays in some of the titles" as the cinema reopening and theatrical release schedules have remained in flux.

Stephens said one of the key drivers behind the WarnerMedia reorganization is to put "real focus" on the direct-to-consumer business in addition to continuing AT&T's promise to reduce costs and find efficiencies across its operations. "I view it more as a refocusing of the company." He said it will allow for a more coherent content and international strategy as opposed to separate strategies across the various divisions.

"These transitions are tough, and there are a lot of good people who have been involved in this," Stephens concluded. "This is a transformation of making things better, not because we needed to adjust anything, but rather because we are striving to get even better" than the HBO Max launch was and "to get even better than WarnerMedia has traditionally performed."

WarnerMedia CEO Jason Kilar, whom Stephens lauded for "knowing" his business and being "a really good leader," started making his mark on the entertainment giant, surprising Hollywood on Friday by announcing a comprehensive reorganization that included the departure of WarnerMedia Entertainment chairman Bob Greenblatt. The shakeup, which Kilar described in a memo to staff as “smart and bold risks” consolidates WarnerMedia’s otherwise unwieldy content divisions into one unit that will be overseen by Warner Bros. chief Ann Sarnoff, a significant promotion for the BBC Worldwide North America executive who has been at the company since last summer.

Plus, in a move that will consolidate programming decision making under one roof, HBO veteran Casey Bloys will report to Sarnoff and oversee a content team that encompasses the premium cable network, streamer HBO Max and a trio of basic cable channels.

On Monday, WarnerMedia began a round of layoffs, letting go hundreds of staffers amid the coronavirus crisis that has crippled Hollywood with shelved tentpoles and production shutdowns. Sources said the first wave of layoffs is expected to be around 600 staffers, with a heavy focus on Warner Bros. 

Stephens said that HBO Max will remain one of the key growth focus areas for the company. AT&T-owned WarnerMedia at the end of July said its new streaming had attracted 4.1 million subscribers after its first month, with AT&T CEO John Stankey lauding his team for a "flawless launch" despite the novel coronavirus pandemic. The figure included more than 1 million wholesale customers from AT&T wireless packages that include HBO Max and about 3 million customers regular retail subscribers. The company hopes to reach 50 million to 55 million HBO Max customers in the U.S. by 2025. 

AT&T recently detailed a roughly $830 million hit to second-quarter earnings before interest, taxes, depreciation and amortization from the novel coronavirus pandemic and a roughly $2.8 billion revenue impact after in the first quarter having mentioned a $433 million earnings and a $600 million revenue hit.

Stephens said overall business trends were looking as solid as possible amid the pandemic. But he declined to make a call on whether the worst financial impact was behind the company and broader industry amid a "tough environment" for the WarnerMedia businesses.