AT&T Beat the Authorities Over Time Warner—Now Comes the Laborious Half

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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 mother or father firm.

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

Jeff Bewkes

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

Congratulations,

AT&T
Inc.,

T -6.20%

now all that is yours. The telecom large 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 look like a breeze in comparison with what comes subsequent—delivering on the promise of the deal.

A significant problem will likely be integrating a staid cellphone firm with an leisure behemoth stuffed with larger-than-life personalities. AT&T should reconcile its tradition, the place all however 9 high executives normally 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, based on individuals acquainted with the businesses’ journey insurance policies.

Time Warner

New York-based Time Warner is the mother or father of prolific film and tv producer Warner Bros. (“Surprise Lady,” “The Massive Bang Principle”) and likewise owns cable channels HBO, TNT, TBS and CNN.

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

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

Political spending: $11.7 million* Staff: 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 big 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 determine the place to attract the road.

“AT&T might want to exhibit it will probably successfully handle a media enterprise,” stated

Mike White,

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

The businesses stated they stay 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 choice in AT&T’s favor, although he warned the federal government in opposition to making an attempt that tactic in an unusually blunt opinion.

AT&T has pledged to reinvent TV promoting and problem

Fb
Inc.

and Google in successful advertising and marketing budgets. It has thought of promoting advert house on channels equivalent to TNT and CNN in a brand new manner, concentrating on totally different households with totally different adverts, based on remarks by firm executives on the trial.

Somewhat than operating 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 adverts. AT&T would marshal the anonymized information it retains on hundreds of thousands of wi-fi customers—together with their viewing habits and areas—to assist goal the adverts after which see if individuals went someplace or bought one thing after seeing them.

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

AT&T can be making an attempt to realize floor in a market battle to win over cord-cutters who’re dropping cable and satellite tv for pc companies 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 worth 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 large and ran its large landline enterprise earlier than main the corporate’s acquisition of DirecTV in 2015.

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

Mr. Stankey, a day by day presence through 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 acquainted with the state of affairs 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,” based on an individual in attendance.

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

Inside Time Warner, executives have expressed concern fast-paced inventive 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 government who was concerned in transition planning with AT&T. “Small selections require a number of conversations.”

AT&T has already signaled it might get entangled within the inventive 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 determine what programming is well worth the funding.

“Neither firm right now has the wherewithal to really execute round utilizing information analytics to assist inform the inventive course of,” Mr. Stankey testified through the trial, referring to AT&T and Time Warner. “There will likely be extra info coming after the enterprise is mixed and the fact is that individuals are going to should study 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 way of the chief ranks and gave many individuals new, less-impressive titles and decrease salaries.

“It’s not an amazing morale booster or incentive,” stated one former DirecTV government who took the pay and title minimize. “They might 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 places of work, a number of assistants, journey advantages—are additionally anticipated to finally go below the microscope.

“When you get to the airport early and get a Coke, that’s in your dime,” one individual acquainted with AT&T’s journey coverage stated.

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

The political leanings of the businesses’ workers additionally differ. AT&T staff and associates’ political contributions totaled $11.7 million, about two-thirds of which went to GOP candidates, through the 2016 election cycle, based on 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 study, operating a media firm comes with loads of gut-check moments that don’t have any rule guide.

The incident involving Ms. Bee on her present, “Full Frontal,” caught high Time Warner executives unexpectedly. 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 youngsters from their mother and father on the border.

Legal professionals at Turner, the unit that oversees cable channels together with TBS, recommended not utilizing the road, however a programming government assigned to the present stated censoring it with a “bleep” could be advantageous, based on an government acquainted with the matter. Nobody took the dialogue additional up the meals chain, the chief stated.

In one other high-profile choice, CNN fired comic Kathy Griffin final yr from its New 12 months’s Eve program after she appeared in a photograph holding a fake bloody severed head of President Trump.

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

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 choice 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 persistently 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 destructive 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, individuals near the state of affairs have stated. Each the White Home and the Division of Justice have denied any such motivation.

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

Jeff Zucker’s

contract was just lately prolonged by way of the top of 2020 by present Turner administration, an individual acquainted with the state of affairs stated. Individuals near CNN and acquainted with AT&T’s considering imagine Mr. Zucker is safe.

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

Michael Cohen,

a private lawyer and fixer to Mr. Trump, as a political guide, 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 government who will oversee Time Warner, is seen by individuals who have sat throughout the desk from him as having the correct temperament for the job.

“He’s calm and deliberate,” stated

David Zaslav,

chief government of cable programming large

Discovery
Inc.

Mr. Zaslav stated he doesn’t anticipate Mr. Stankey to weigh in on programming selections however will as an alternative concentrate on the massive image.

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

John Martin,

the chief government of Turner, is predicted to go away the corporate, partly 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 Laborious Half Is But to Come.’



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