AT&T restructures WarnerMedia to cut $10 bn Opex pressure

AT&T is restructuring WarnerMedia, its entertainment and content business, as part of the strategy to reduce pressure on its operations expenditure, Reuters reported.
AT&T campaignAT&T has already announced a major job cut without sharing more details. AT&T has also lost two executives — Richard Plepler, head of HBO and David Levy, president of Turner Broadcasting.

AT&T last week won an appeals court decision challenging its $85 billion deal to buy Time Warner. AT&T aims to reinvest savings into its programming businesses. It will launch an early version of its HBO-led subscription video streaming service late this year.

On the other hand, Netflix has 150 million plus subscribers. The global direct-to-consumer video streaming service spent heavily on Hollywood television and movie talent.

Disney, which paid $71 billion to buy Twenty-First Century Fox’s film and television assets, will launch its Disney+ streaming service by the end of 2019.

Earlier, AT&T CFO John Stephens said the telecom operator is confident in its ability to stabilize EBITDA in its Entertainment Group in 2019. The company expects a significant improvement in the EBITDA growth rate in the first quarter of 2019.

Entertainment Group EBITDA will reflect improving video ARPU as previous 2-year price locks continue to expire. The company also expects that annual price increases and growth in advertising revenues will help offset content cost increases.

AT&T will focus on profitability for DIRECTV NOW with focused promotions. AT&T said earlier that WarnerMedia was accretive to revenues, adjusted EPS and free cash flow in the second half of 2018. The company expects merger-related synergies of about $700 million by year-end 2019.
AT&T earlier said its total revenue for the fourth quarter of 2018 was $48 billion (+15.2 percent) primarily due to the Time Warner acquisition.

Operating expenses of AT&T rose to $41.8 billion versus $40.4 billion in the year-ago quarter, primarily due to the Time Warner acquisition.

Operating expenses of AT&T rose by about $2.9 billion due to the Time Warner acquisition and Entertainment Group content cost pressure in Q4.

In 2018, AT&T’s operating expenses were $144.7 billion against $140.6 billion, primarily due to the Time Warner acquisition.

AT&T had spent an additional about $10 billion towards operating expenses due to the Time Warner, Entertainment Group content cost pressure and higher wireless equipment costs, partially offset by the write-off of certain network assets in the prior year and cost efficiencies.

“At a time when we must shift our investment focus to develop more content for specific and demanding audiences on emerging platforms, we can’t sustain a model where we invest one dollar more than necessary in the administrative aspects of running our business,” WarnerMedia CEO John Stankey said in a memo to its employees.

Robert Greenblatt, a former executive at Comcast Corp’s NBCUniversal unit, will oversee premium cable network HBO, cable channels TNT, TBS, Tru TV and the upcoming video streaming service as chairman of WarnerMedia Entertainment.

CNN chief Jeff Zucker will add oversight of sports programming across the company as chairman of News and Sports.

Kevin Tsujihara will continue to run Warner Bros Hollywood and TV studios and add two new businesses to his responsibilities, including a newly created kids and young adult group.

The overhaul will bring together kids programming from across the company, including storied franchises Hanna-Barbera and Loony Tunes. Tsujihara will also oversee the licensed consumer products business across the company.

WarnerMedia has also consolidated advertising sales and affiliate sales under one division to be run by Gerhard Zeiler, newly appointed chief revenue officer. Zeiler was president of Turner International.