On the eve of AT&T’s third-quarter earnings report, WarnerMedia’s top leadership invited Variety to the Warner Bros. lot in Burbank for an open-ended conversation about where the company is headed as regulators scrutinize its planned merger with Discovery Inc. That deal will see the entertainment division spun off from the telecom giant a mere three years after AT&T finalized its purchase of HBO, Warner Bros. and Turner networks for $85.4 billion.
WarnerMedia CEO Jason Kilar, Ann Sarnoff, chair and CEO of WarnerMedia Studio and Networks Group, and Andy Forssell, executive vice president and general manager of WarnerMedia direct-to-consumer, were all present for the conversation. The trio stressed that despite the fact that the company is operating in the shadow of yet another disruptive merger, they are focused on positioning WarnerMedia (soon to be rechristened Warner Bros. Discovery) as one of the victors in the streaming wars.
No topic was off limits — from bracing for adjusting to a new leader in under Discovery CEO David Zaslav to the upside of the company’s historic decision to release all of its 2021 movies simultaneously in theaters and on HBO Max. Even future job prospects were discussed. Here are key takeaways from the roundtable discussion.
The Day-and-Date Strategy Is Working, But It’s About to Go Away
Many a WarnerMedia insider has bemoaned the excessive media coverage of the decision to stream the entire 2021 Warner Bros. film slate on HBO Max and release them in theaters concurrently. But, curiously, the team has not been particularly vocal about its success in recent months — neither in garnering HBO Max subscribers nor salvaging its relationship with exhibitors by promising splashy theatrical marketing budgets and a 45-day minimum window of exclusivity for its 2022 movies.
“We could be louder,” said Forssell. Kilar echoed this sentiment, saying “we could ring the bell louder, which is one of the many reasons why I love getting to do what I do. Ann and Andy are humble, I’m humble, and sometimes It takes a little bit of a nudge to get us to lean in and ring that bell.”
Sarnoff said, perhaps most succinctly, “It wasn’t the time to boast.” She was presumably referring to celebrating wins amidst the global pandemic, and the economic havoc and job losses it caused in the media sector.
Zaslav Has Gone to Hollywood School
Since the announcement that Discovery would be taking the keys to WarnerMedia from AT&T, there’s been much speculation about how incoming honcho Zaslav will run the show. Sarnoff, Forssell and Kilar underscored their obligations to the regulatory process and said they have been forbidden from discussing management and transition matters with Zaslav until the transaction closes. But that doesn’t mean they don’t have first impressions of the man who might soon be their boss, especially after Zaslav visited the company in June for a town hall, with Kilar interviewing him.
“I think the teams are favorably impressed,” Sarnoff said. “He was authentic and approachable. He said he doesn’t really understand our businesses in the studios and networks group … he doesn’t understand the scripted side, because Discovery is primarily in the unscripted business.”
Sarnoff went on to say that Zaslav has “been around town, going to school. I think people like that. He’s really trying to understand how we do things instead of forming his opinions too quickly.”
Subsequent general meetings between Zaslav and Kilar and his director reports have “given our teams more comfort that [he is] going to understand who we are and what we do. He’s a guy who has come from the media business and gets it, and as much as we love AT&T, people are excited about being a pure-play media company going forward,” Sarnoff concluded.
While Hollywood’s direct-to-consumer obsession is cheering Wall Street, a major consequence of the current M&A spree is job losses — staggering amounts, in some cases. Variety asked Kilar, Forssell and Sarnoff about the mood on the studio lot since news broke that Discovery would scoop them up — specifically referencing previous reports about fear and confusion over the days ahead.
“I would push back on low morale. I do not see that,” said Kilar.
Christy Haubegger, WarnerMedia chief inclusion officer and executive vice president of communications, referenced an internal study at the company that measured job satisfaction. It was conducted before the news of the Discovery deal broke in May. About 17,000 of the company’s 28,000 employees participated.
“We continue to measure those things and we have not seen meaningful [change] since,” Haubegger said.
Kilar spoke for himself, Sarnoff and Forssell in saying, “leaders need to lead. They need to set a vision, set a context for that vision and ultimately install confidence in those two things. I’m very happy to report that it’s working in terms of the results of the business. There’s an understandable level of uncertainty about what happens a year or two from now. In terms of comfort today, and how we’re doing and the effectiveness of our strategy, it’s very high.”
Sarnoff said the same goes for WarnerMedia’s creative partners, some of whom — most prominently director Christopher Nolan — decried the studios day-and-date strategy involving HBO Max. She also said that company’s studios and networks executives have never had more cross-pollination.
“We have the entertainment content team all together and that has put wind in people’s sails, “ she said. Examples of this harmony includes “The Suicide Squad” film spinning out John Cena’s “Peacemaker” into its own original series. On a broader level, she spoke of the partnership between Warner Bros. Pictures Group chairman Toby Emmerich and Casey Bloys, chief content officer for HBO and HBO Max.
“There are movies for theaters and HBO Max coming from Toby, who is now joined at the hip with Casey. None of that existed a year ago. All of their jobs and opportunities have opened up,” Sarnoff said.
The Big Three?
As WarnerMedia aims to draw in new subscribers the company has analyzed who, how and what brings in business to HBO Max. As a result of that analysis, Sarnoff confidently asserted that the streamer has long-term staying power.
“In terms of those three streaming services that we think are winners, we are going to be one of them,” Sarnoff said, pointing to the breadth and depth of company’s upcoming slate, which boasts five DC movies (including “The Batman,” “Black Adam” and the “Aquaman” — all of which made a splash last Saturday at the second annual DC Fandome virtual convention) and the “Game of Thrones” prequel series, which she pegs as another four-quadrant draw.
“We can serve the entire family, as well as give people those amazing kind of fan-centric series and shows,” she explained. “We’re really doubling down on both [areas] and that’s why we’re spending so much money on our content,” Sarnoff added. “We’ve raised our game tremendously in the last year.”
Sarnoff did not elaborate on what defined a “winning” streaming service, thought Kilar later offered that a metric he used was the company’s ability to divest from Amazon’s wholesale channel platform and still amass subscribers at volume.
“There’s only three companies on the planet that can make this decision from a position of strength and Warner is clearly one of them,” Kilar explained, calling out Netflix and Disney as the other two industry leaders. As for the typical consumer who was a subscriber via Amazon, Kilar is encouraged that they will find their way to the HBO Max platform instead.
Though earnings are on the brain, Variety’s conversation with the WarnerMedia leadership also came on the eve of “Dune” – Denis Villenueve’s sci-fi epic that has many industry observers watching closely for box office and streaming performance.
The opening title of the movie proclaims that the project is “Dune Part 1,” and Villenueve’ previously told Variety that he’s optimistic he will get to shoot a sequel to Frank Herbert’s 1965 novel. But is the WarnerMedia team ready to officially announce the green light for part 2?
“I’m not breaking news today,” Sarnoff said. But the team is more than happy with the $130 million the film has grossed internationally. Kilar pointed out enthusiastically that the film has yet to open in North America, China, or the U.K.
“We’re really, really happy with where we’re at 14 days in,” he said. Sarnoff did illuminate what factors will determine whether a sequel eventually gets the go-ahead.
“The story in itself sets up for a sequel. The production is so amazing and the storytelling is so compelling that it’s not going to be judged on box office alone,” Sarnoff said, explaining that the green light will be based on “the entirety of what ‘Dune’ can do for the company, including HBO Max.” She also noted that the box office has not fully recovered from the pandemic, which is changing the way the studio is assessing the future box office potential of its movies.
“We’re not doing our ultimates in green lights the way we used to,” Sarnoff said. “You have to kind of consider the circumstance that we’re in now, and project to a more normal circumstance.”
For the record, a “Dune: The Sisterhood,” a prequel series based on the Bene Gesserit, was ordered straight to series at HBO Max in 2019, with onetime showrunner Jon Spaihts exiting that role to focus on the writing the script for the second of the “Dune” movies. Diane Ademu-John has taken over as showrunner.
All three executives underscored the unprecedented amount of money being spent on content across all of WarnerMedia’s content engines. Despite the fact AT&T has been saddled with debt, the Warner team claimed that’s not infringing on their ability to pay top dollar. Kilar said Bloys has never had a larger budget in his 17 years at the company. When pressed on how they’re footing the bill, Sarnoff pointed to the tremendous cash the company generates and said they are reinvesting significantly in the business.
Warner Bros. Television, for one, makes shows for all of Hollywood, including the Apple TV Plus juggernaut “Ted Lasso.” Sarnoff noted that the show was developed before HBO Max existed. But even though Jason Sudeikis isn’t lighting up HBO Max, the property is still valuable for the studio.
“When it was greenlit there was no HBO Max,” she said. “But, yes, it is profitable because I think it’s no great surprise the streamers pay a cost-plus model. We’re very thrilled to have a hit a hit show and partner in Apple on that, and Jason and [co-creator] Bill [Lawrence]. It’s the right thing in this moment in time to have a series about this kind of guy who’s so hopeful.”
Much Ado About Jason
Kilar was less concrete about his future with WarnerMedia, acknowledging that there’s a lot of speculation that he’ll step down once the Discovery merger closes. “It’s a fair question,” Kilar said when asked if he had definitive plans to leave when Zaslav takes the helm of Warner Bros. Discovery.
“I’ll repeat what I shared with every single team member here on this lot, which is, in the new year, I will put my brain cells against that question,” he continued, promising transparency around his decision as he gets to “closure” on that question.
Explaining why he doesn’t have a clear-cut answer right now, Kilar explained that he’s focused on other matters at the moment.
“We’ve got a lot going on right now. We’ve got a big business with almost 30,000 people, that’s growing,” he said. “We’ve got, I think, the fastest growing streaming service in the markets in which we operate. And that’s my focus.”
(Pictured: “Dune: Part 1”)