WarnerMedia's Big Question: How Many Jobs Will Be Lost to Consolidation?
Hundreds of pink slips are coming for "duplicative administrative functions" in AT&T's entertainment empire, and CEO John Stankey and TV chief Bob Greenblatt risk eroding "distinctive" individual brands like HBO and Turner in the process.
When President Trump passed a tax-reform bill in December that lowered the corporate rate, AT&T celebrated by issuing $1,000 bonuses to 200,000 employees and by increasing capital expenditures by $1 billion domestically. Brass told employees the move would lead to "7,000 good-paying jobs for American workers."
Three weeks later the telecom giant — still fighting a Justice Department lawsuit to undo its $85 billion acquisition of Time Warner — made it clear that those additional jobs would not be at AT&T but in the sector at large, and, in fact, layoffs were afoot.
"To win in this new world, we must continue to lower costs and keep getting faster, leaner and more agile," AT&T technology and operations president Jeff McElfresh told employees in a memo in early January. AT&T won its DOJ case Feb. 26, finalizing its merger with Time Warner, now known as WarnerMedia, and on March 4 the company reorganized its acquisition.
While there could be hundreds, if not thousands, of unemployed AT&T workers in the next few months, their numbers shouldn't approach the 7,500 or so expected to lose their jobs when Disney closes its partial merger with 21st Century Fox. In fact, some insiders say AT&T's head count of 273,000 won't drastically change because some new hiring will occur as priorities shift, as is the case with the WarnerMedia streaming initiatives.
"A finance bean-counter from a telephone company doesn't want to go in and spoil what is a tremendously good asset," AT&T CFO John Stephens told Wall Street analysts Feb. 27 while discussing WarnerMedia. Perhaps more ominously, however, WarnerMedia CEO John Stankey told employees after winning the DOJ battle that the company "can't sustain a model where we invest one dollar more than necessary in the administrative aspects of running our business."
"They've been very careful with the press, but cost-cutting comes with realignment," says Mary Ann Halford, senior adviser at OC&C Strategy Consultants. The shake-up saw HBO CEO Richard Plepler leave and former NBC Entertainment chairman Bob Greenblatt hired as chairman to oversee entertainment assets, including HBO, as well as the streaming properties that will compete with Netflix, while CNN chief Jeff Zucker added sports to his portfolio.
Plus, Warner Bros. head Kevin Tsujihara added global kids and young adults content to his purview, though the executive's apparent sexual relationship with an actress, Charlotte Kirk, whom he championed, is being investigated. That there are layoffs coming amid a shift in priorities shouldn't be a surprise as legacy media contends with cord-cutting.
Since October, the U.S. workforce has grown by 722,000, but the "information" sector — which includes jobs in radio, TV and internet broadcasting; news publishing; video production and exhibition; sound recording and the like — saw employment fall by 11,000 to 2.82 million, according to the Bureau of Labor Statistics.
At WarnerMedia, Halford expects most layoffs to come from HBO and Turner "largely because they are morphing those together." Especially at risk are jobs with affiliate sales and marketing along with administrative workers, though fewer layoffs will come from Warner Bros. "I'm not going to combine the creative groups of these networks into one group," Greenblatt recently told THR. "That would erode their distinctive brands right off the bat."
As legacy media workers fear for their livelihoods, AT&T will likely be in hiring mode for its streaming services, an initiative that has Wall Street divided; some believe the more lucrative approach is to sell content to the highest bidder rather than hoard it for an unproven product that has a lot of catching up to do, considering Netflix's 139 million worldwide subscribers.
Richard Greenfield of BTIG, for example, says WarnerMedia needs to take drastic steps to keep up not only with Netflix and Amazon Prime, but also Disney and its upcoming Disney+ streamer. He suggests that the company collapse theatrical windows to get Warner Bros. movies on the streamer quickly; focus Turner completely on sports (including bidding for Monday Night Football) so that all original programming can go to the yet-to-be named OTT service; stop selling content to third parties, including Friends to Netflix and The Sopranos to Amazon; and "use HBO as the all-encompassing direct-to-consumer brand."
When asked about planned layoffs, an AT&T spokesperson told THR on March 8 that the goal is "to find efficiencies in how our companies work together to ensure we can focus our investments and resources into developing more high-quality content and not on duplicative administrative functions."
It's no shocker that AT&T needs to rein in spending, given that its debt has soared to $171 billion since the WarnerMedia acquisition, one of the highest levels in corporate America. To raise money, it may sell its 10 percent stake in Hulu for about $1 billion, possibly to Disney, which will own 60 percent of the streamer once its partial merger with 21st Century Fox closes March 20.
As for those remaining after layoffs, analyst Jimmy Schaeffler warns of heightened expectations because of the price AT&T paid for WarnerMedia: "Everyone involved will put on — or take — additional stress and pressure in order to maximize its success."
This story appears in the March 13 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.