AT&T Beat the Government Over Time Warner—Now Comes the Hard Part

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Final month, comic

Samantha Bee

used a vulgarity to explain

Ivanka Trump

on her TBS present. It was bleeped on air, however ran on-line, and set off a scramble inside

Time Warner
Inc.,

TWX 1.80%

the community’s mum or dad firm.

Advertisers pulled out. Ms. Bee apologized. Time Warner Chief Government

Jeff Bewkes

was livid. The comic’s defenders argued that stars on sister channel HBO get to cross strains on a regular basis, folks accustomed to the matter stated. Ultimately, Ms. Bee wasn’t suspended.

Congratulations,

AT&T
Inc.,

T -6.20%

now all that is yours. The telecom big this week defeated the federal government in a landmark antitrust case that each one however secures its $80 billion takeover of Time Warner. That authorized odyssey could quickly appear to be a breeze in comparison with what comes subsequent—delivering on the promise of the deal.

A significant problem might be integrating a staid cellphone firm with an leisure behemoth crammed with larger-than-life personalities. AT&T should reconcile its tradition, the place all however 9 high executives often fly coach, with Time Warner’s Hollywood way of life, the place most vice presidents and above fly enterprise class and airport greeters are frequent, in line with folks accustomed to the businesses’ journey insurance policies.

Time Warner

New York-based Time Warner is the mum or dad of prolific film and tv producer Warner Bros. (“Surprise Lady,” “The Large Bang Principle”) and in addition owns cable channels HBO, TNT, TBS and CNN.

Political spending: $2.four million* Workers: 26,000 2017 Income: $31.27 billion AT&T

Dallas-based supplier of wi-fi, satellite-TV and different telecommunications providers with operations all through the U.S. and Latin America.

Political spending: $11.7 million* Workers: 252,000 2017 Income: $160.55 billion

Sources: the businesses; OpenSecrets (political spending)

* for the 2016 election cycle

What was as soon as Ma Bell should abdomen large spending on content material, figuring out that flops are a reality of life in Hollywood. And, as within the case of Ms. Bee, it should resolve the place to attract the road.

“AT&T might want to reveal it could successfully handle a media enterprise,” stated

Mike White,

the previous chief govt of DirecTV, the satellite tv for pc broadcaster that AT&T acquired in 2015. “Which means, particularly, retaining key expertise and inspiring a tradition of innovation.”

The businesses stated they sit up for closing the deal on or earlier than their agreed-upon June 20 deadline. The federal government might throw a wrench within the course of by interesting federal choose Richard Leon’s resolution in AT&T’s favor, although he warned the federal government in opposition to attempting that tactic in an unusually blunt opinion.

AT&T has pledged to reinvent TV promoting and problem

Fb
Inc.

and Google in profitable advertising and marketing budgets. It has thought of promoting advert area on channels corresponding to TNT and CNN in a brand new approach, focusing on completely different households with completely different advertisements, in line with remarks by firm executives on the trial.

Fairly than working an advert for an arthritis drug for a complete viewers, a younger household would possibly see a diaper advert, whereas a single man close by would possibly see videogame advertisements. AT&T would marshal the anonymized information it retains on hundreds of thousands of wi-fi customers—together with their viewing habits and places—to assist goal the advertisements after which see if folks went someplace or bought one thing after seeing them.

There are main hurdles standing in the best way of this technique, together with the likelihood it might cannibalize nationwide promoting income and require cooperation from rival pay-TV distributors that’s unlikely to be forthcoming, folks accustomed to the plans say.

AT&T can also be attempting to achieve floor in a market battle to win over cord-cutters who’re dropping cable and satellite tv for pc providers together with its personal DirecTV. It’s planning to launch a roughly $15-a-month bundle of channels, together with Turner’s CNN, TNT and TBS, that doesn’t embody sports activities networks. The service would include an app preloaded on AT&T Wi-fi clients’ smartphones. That’s an aggressive value in an trade the place roughly $40 is the norm for a “skinny” bundle.

The person who has been tapped to run Time Warner for AT&T is

John Stankey,

a 32-year firm veteran. He climbed the ranks of the cellphone big and ran its big landline enterprise earlier than main the corporate’s acquisition of DirecTV in 2015.

A towering govt with a deep voice and an intimidating presence, Mr. Stankey isn’t well-known in media circles. He might be coping with high-profile and better-paid underlings at Time Warner. Mr. Stankey made $10 million in 2017, in line with an AT&T securities submitting, far beneath the compensation packages of the heads of Time Warner’s HBO, Warner Bros. and Turner, in line with folks accustomed to the matter.

Mr. Stankey, a every day presence throughout the antitrust trial, is predicted to make the rounds in coming days with Time Warner’s management. He’s assembly with high Turner executives this week in New York, an individual accustomed to the scenario stated.

Final yr at a gathering of media trade leaders hosted by the boutique funding financial institution Lion Tree, Mr. Stankey acknowledged “we’ve acquired one of many extra complicated administration duties of any organized entity sitting in entrance of us,” in line with an individual in attendance.

Mr. Stankey stated AT&T wouldn’t be allergic to spending cash on the fitting challenge. “We’re not going to screw up a hundred-billion greenback transaction for need of a billion of funding,” he stated.

Inside Time Warner, executives have expressed concern that a fast-paced artistic tradition may very well be stymied by a phone firm unfamiliar with the idiosyncrasies of constructing and advertising and marketing films and tv.

“There was a way of a way more intense forms” at AT&T, stated one Time Warner govt who was concerned in transition planning with AT&T. “Small choices require a number of conversations.”

AT&T has already signaled it could get entangled within the artistic course of. Executives have proposed utilizing particular information on what sorts of viewers are watching exhibits, and the way a lot time they spend doing so, to assist resolve what programming is definitely worth the funding.

“Neither firm immediately has the wherewithal to truly execute round utilizing information analytics to assist inform the artistic course of,” Mr. Stankey testified throughout the trial, referring to AT&T and Time Warner. “There might be extra info coming after the enterprise is mixed and the truth is that persons are going to must be taught new tips.”

AT&T’s takeover of DirecTV is the closest blueprint Time Warner has for what could lie forward. After AT&T assumed management, it combed by the chief ranks and gave many individuals new, less-impressive titles and decrease salaries.

“It’s not an awesome morale booster or incentive,” stated one former DirecTV govt who took the pay and title lower. “They’d let you know you’re nice, however they’re very stingy.”

The lavish perks that usually go hand-in-hand with the leisure trade—fancy workplaces, a number of assistants, journey advantages—are additionally anticipated to finally go below the microscope.

“For those who get to the airport early and get a Coke, that’s in your dime,” one particular person accustomed to AT&T’s journey coverage stated.

At Warner Bros., the expense coverage is extra beneficiant and plenty of executives get greeters after they arrive and depart from the airport to hurry them by safety, individuals who know its insurance policies say.

The political leanings of the businesses’ employees additionally differ. AT&T workers and associates’ political contributions totaled $11.7 million, about two-thirds of which went to GOP candidates, throughout the 2016 election cycle, in line with OpenSecrets, a part of a nonprofit analysis group. Time Warner’s contributions reached $2.four million, 87% of it to Democrats.

As AT&T will quickly be taught, working a media firm comes with loads of gut-check moments that don’t have any rule e-book.

The incident involving Ms. Bee on her present, “Full Frontal,” caught high Time Warner executives without warning. Her assertion describing Ms. Trump with a vulgar time period for feminine anatomy got here as a part of a monologue criticizing her father, President

Donald Trump,

for a coverage that separated migrant kids from their dad and mom on the border.

Attorneys at Turner, the unit that oversees cable channels together with TBS, prompt not utilizing the road, however a programming govt assigned to the present stated censoring it with a “bleep” could be positive, in line with an govt accustomed to the matter. Nobody took the dialogue additional up the meals chain, the chief stated.

In one other high-profile resolution, CNN fired comic Kathy Griffin final yr from its New Yr’s Eve program after she appeared in a photograph holding a pretend bloody severed head of President Trump.

Simply earlier than Ms. Bee’s efficiency, AT&T’s chief govt,

Randall Stephenson,

gave some indication of how he would possibly reply to such incidents. He was requested on the Code Convention, a gathering of media and tech executives, in regards to the resolution of

Walt Disney
Co.

to cancel ABCs “Roseanne” after its star made a racist tweet a couple of former aide to President

Barack Obama.

Mr. Stephenson replied, “that could be a no-brainer, proper?”

President Trump has constantly attacked Time Warner’s CNN cable channel. Throughout and after the 2016 presidential marketing campaign, his aides complained privately to high Time Warner executives about unfavourable protection and the make-up of skilled panels, The Wall Road Journal reported.

AT&T and Time Warner executives believed that one of many causes for the federal government’s swimsuit to dam the deal was President Trump’s aversion to CNN, folks near the scenario have stated. Each the White Home and the Division of Justice have denied any such motivation.

AT&T has stated it wouldn’t intrude with CNN’s editorial independence. CNN President

Jeff Zucker’s

contract was just lately prolonged by the top of 2020 by present Turner administration, an individual accustomed to the scenario stated. Individuals near CNN and accustomed to AT&T’s considering consider Mr. Zucker is safe.

AT&T itself was embarrassed final month when information broke that it had retained

Michael Cohen,

a private legal professional and fixer to Mr. Trump, as a political advisor, paying him $600,000.

Mr. Stephenson stated the hiring was a “massive mistake” that broken AT&T’s fame, and he compelled out the top of the corporate’s Washington, D.C., operations.

Mr. Stankey, the AT&T govt who will oversee Time Warner, is seen by individuals who have sat throughout the desk from him as having the fitting temperament for the job.

“He’s calm and deliberate,” stated

David Zaslav,

chief govt of cable programming big

Discovery
Inc.

Mr. Zaslav stated he doesn’t count on Mr. Stankey to weigh in on programming choices however will as an alternative concentrate on the large image.

“He’s not the man who figures out who to forged in your drama,” however might be a “artistic chief” who can fuse high quality content material with AT&T’s cell phone operation, Mr. Zaslav stated.

John Martin,

the chief govt of Turner, is predicted to depart the corporate, partially as a result of Mr. Stankey plans to be extra hands-on than Mr. Bewkes.

Write to Joe Flint at joe.flint@wsj.com, Drew FitzGerald at andrew.fitzgerald@wsj.com and Alexandra Bruell at alexandra.bruell@wsj.com

Appeared within the June 14, 2018, print version as ‘For AT&T, the Exhausting Half Is But to Come.’



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