Employees at WarnerMedia, the newly re-christened entertainment enterprise formerly known as Time Warner, are eyeing their new corporate leaders with trepidation. They’re worried that AT&T, the telecommunications giant that snapped up the company in a blockbuster $85 billion transaction, will do a lot more than simply rename its new bauble.
Having lived through one megamerger — Time Warner’s disastrous 2000 marriage with AOL — and seen other entertainment companies, such as NBCUniversal and Scripps, get taken over by sprawling corporate owners, they’re understandably fearful of a future that undoubtedly will include layoffs and cultural overhauls. And AT&T is known for cutting costs.
John Stankey, the man tasked with bringing WarnerMedia’s various divisions under the AT&T umbrella, knows that he’s got a sales pitch to make.
“Candidly none of these employees know me or know who I am,” the freshly minted WarnerMedia CEO says in an interview with Variety on June 18. “Human nature is one of inquiry and sometimes skepticism. I just need to kind of remove that dynamic from the equation.”
Stankey, who will be based in New York City, says he intends to spend the bulk of his first full week at the helm of WarnerMedia introducing staffers to his “point of view.” As part of that effort, HBO, Warner Bros. and Turner, the company’s three major entertainment arms, are hosting all-staff meetings at their respective Manhattan, Burbank and Atlanta offices.
Expect Stankey, who previously headed AT&T’s entertainment operations and served as its chief strategy officer, to say all the right things. He’ll talk up AT&T’s commitment to investing in film and television production, as well as trumpet its nearly 157 million wireless subscribers, a vast user base that will enable the company to better hawk the movies and shows it creates. He’ll also be clear that there are no immediate plans to remake WarnerMedia in AT&T’s image.
“There isn’t any drive here to have one culture,” says Stankey. “Frankly, AT&T isn’t a single culture. AT&T is a company that has different cultures depending on the part of the business that you’re operating in.”
To sweeten the transition, Stankey sent around a memo to WarnerMedia staff on Friday offering employee discounts on AT&T products. Some staffers had privately been hoping for free smartphones and hardware, but they’ll have to settle for a 50% discount on voice, text and data plans and waivers on activation and upgrade fees.
Outside observers believe WarnerMedia is in for much more than cosmetic changes and cheaper phone bills. AT&T’s economizing ways aren’t in keeping with those of entertainment companies like Warner Bros. or HBO, where stars, directors and showrunners aren’t just paid royally — they’re provided a lavish lifestyle that includes private jets and the finest hotel suites. Jim Parsons, star of the Warner Bros. Television hit “The Big Bang Theory,” is paid roughly as much as the $28.7 million that Stankey’s boss Randall Stephenson brings in during a single year running AT&T.
“You’ll see a lot of euphoria at the beginning, but the friction is going to come after the first budget cycle,” predicts Todd Klein, partner at the venture capital firm Revolution Growth. “Time Warner paid to keep talent happy in a way that’s going to be uncomfortable for a communications company that’s known for scrupulously looking at costs.”
Then there are the regional barriers that need to be shattered. AT&T is based in Dallas, and though it boasts a market cap of $238 billion, making it one of the biggest companies in the world, its executives tend to be a low-key bunch. They’re not headline hoggers — a breed that’s rare in credit-happy Hollywood.
AT&T has already made significant changes. On Friday, it announced that Turner CEO John Martin, once seen as heir apparent to former Time Warner chief Jeff Bewkes, was heading for the exit. It also said goodbye to other prominent executives, including CFO Howard Averill and corporate communications chief Gary Ginsberg, while retaining HBO chief Richard Plepler and Warner Bros. Entertainment CEO Kevin Tsujihara, two people whose future with the company has been grist for the rumor mill. Stankey declines to say whether or not he has set new deals to keep Tsujihara and Plepler on board, but does say he is committed to the leadership structure unveiled last week.
“That’s the team on the field,” says Stankey.
It’s also the team on the company’s corporate website, a revised version of which — boasting the new divisional poobahs, company name and logo — appeared within hours of the restructuring announcement. In a bit of Stalinist efficiency, old corporate hands such as Bewkes were scrubbed from the home page. Industry analysts believe more changes will take place, but they think that Stankey, who previously oversaw DirecTV’s integration into AT&T, will want to take his time getting to know the disparate businesses before administering any major staffing shake-ups.
“I think they’ll let things settle for the next six months and see who’s who and what’s what,” says Hal Vogel, a veteran media analyst. “But it’s inconceivable that they’ll just leave it alone to operate as it is. They’ll figure out what their strategy is, and then the cultural clashes will start in a year or two, especially if the economy takes a downturn.”
One thing will endear Stankey to many of the WarnerMedia rank and file. The new entertainment chief acknowledges that there will be staffing cuts, but he says they will primarily be at the corporate level — in the old Time Warner legal and human resources arms, for instance. The creative side of the business will largely be spared the chopping block, Stankey implies.
“When you put two Fortune 500 companies together, there’s some replication or duplication that occurs around corporate functions,” says Stankey. “Within the divisions there is no duplication.”
He also believes that most employees will be excited by the opportunities that being a part of one of the world’s largest mobile providers holds. The data that AT&T maintains on consumers can help WarnerMedia program and advertise its content more efficiently while also offering phone subscribers the benefit of a library of hit movies and shows to stream on their devices.
“As we invest and we start to do things differently, things will change and evolve,” says Stankey. “They’ll evolve at a deliberate pace.”
But Stankey also recognizes the hazards of marrying two different workforces, and is aware of the pitfalls that must be avoided. “I know how to communicate with people and understand what’s important to them,” he says. “It’s up to me not to make any silly mistakes.”