Over the last few months, comics readers have watched as the AT&T/WarnerMedia conglomerate has been busy dismantling DC Comics, a plain little publishing company that nonetheless led the way for billion-dollar IPs. First it was scuttling the priceless fan engagement at San Diego Comic Con. Then it was upending comics distribution and moving their new comic day to Tuesday. Then it was removing everyone who had anything to do with the direct market and making obvious signs about relying on digital comics, and mass market distribution.
I hear everyone asking “Why?” Why take a profitable system, profitable imprints, and a truly dedicated and engaged fanbase and just leave them by the wayside?
Well, while granting that no one has had a clear path ahead in these pandemic times, I keep hearing that it’s all part of the general mayhem of the marching orders being given by new AT&T-driven executives.
And indeed, the fallout over WarnerMedia’s shocking decision to release its entire 2021 theatrical slate simultaneously on HBO Max, reveals that the mess is even worse in other divisions, where boosting the streaming service is job #1, to the detriment of everything else.
Creatives and agencies are fuming over the WB decision — and they certainly have a right to be angry. It seems no one was told ahead of time, and there were no soothing, sweet talking attempts from CEO Jason Kilar or studio head Anne Sarnoff to try to soften the blow. In Hollywood’s ego-driven ecosystem, this is tantamount to a declaration of war.
There are several excellent deep dives on the situation. THR’s Kim Masters has a full report, including high dudgeon from Batman/Tenet director Christopher Nolan, one of the studio’s crown gems.
“Some of our industry’s biggest filmmakers and most important movie stars went to bed the night before thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service,” filmmaker Christopher Nolan, whose relationship with Warners dates back to Insomnia in 2002, said in a statement to The Hollywood Reporter.
Added Nolan: “Warner Bros. had an incredible machine for getting a filmmaker’s work out everywhere, both in theaters and in the home, and they are dismantling it as we speak. They don’t even understand what they’re losing. Their decision makes no economic sense, and even the most casual Wall Street investor can see the difference between disruption and dysfunction.”
It was an attempt to soothe Nolan that led to a failed theatrical release for Tenet, which is expected to lose millions and millions of dollars, so perhaps putting a smile on his face is no longer a bullet point on WB execs’ daily agendas. But he has a point. (You can read more Nolan rage at ET Online.) And Hollywood is ANGRY, Masters writes:
Surprisingly to some in the industry, sources say the idea was the brainchild of Warner Bros. COO Carolyn Blackwood who, looking at a relatively weak 2021 slate, saw an opportunity to avoid the humiliation of potentially bad grosses while currying favor with streamer-obsessed higher-ups. The instant response in Hollywood was outrage and a massive girding for battle.
“Warners has made a grave mistake,” says one top talent agent. “Never have this many people been this upset with one entity.” Like others, he had spent much of the day dealing with calls from stunned and angry clients. And that swooshing sound you hear? It’s the lawyers, stropping their blades as they prepare for battle: that Warners was self-dealing in shifting these movies to its own streamer, perhaps, or that the company acted in bad faith. Some talent reps say the decision affects not only profit participants but others who have worked on films as the move might affect residual payments. They expect and hope that the guilds will get involved. (The Writers Guild of America declined to comment.)
The feeling, as one top agent notes, is that WarnerMedia, AT&T head John Stankey, Kilar and Sarnoff “don’t understand the movie business, and they don’t understand talent relations.”
Another complicating factor: paying talent their backends for expected theatrical income. The Wonder Woman 1984 crew was given a big payout, but others may not see the same money:
WarnerMedia had to shovel tens of millions at Gal GAdot and the other key players because the company wants a third in the series. But that sets the bar high. Sources say even Suicide Squad director James Gunn, who is platform-agnostic, was not pleased when the studio followed its shocking announcement by floating a lackluster formula for compensating him and other profit participants in the film.
Another must-read is Alex Sherman’s report at CNBC: AT&T dismantles Time Warner to battle Netflix: The inside story that lays out the whole sorry story in numbers-drenched detail: the mishandling of the stellar HBO brand, the botched launch of HBO Max, and a blinkered insistence on putting the streaming cart ahead of the content horse. And also just bad people skills:
Around the same time, Stankey held a meeting with senior executives at the Time Warner Center boardroom in New York.
An outside consultant, Peter Cairo, who had spent the last few months interviewing 65 WarnerMedia executives, presented a number of problems with Time Warner’s siloed approach. Many of the senior leaders in attendance thought the presentation was doctored to support Stankey’s view that the company’s leadership was standing in the way of progress. Others viewed Cairo’s work as harsh truth. Cairo, who had a history of working with Time Warner’s leadership team, told the group HBO was particularly resistant to working with other parts of the company.
Several veteran executives, including Bernadette Aulestia, head of HBO’s global distribution and Donna Speciale, president of WarnerMedia’s ad sales, spoke up to defend Time Warner’s history of success while questioning the way AT&T was handling staff morale.
The meeting ended tersely with Stankey cutting off dialogue early, three of the people said.
Looming over everyone is AT&T’s huge debt load and struggling stock prices — but also the previous mishandling of AT&T’s acquisition of DirecTV, which Stankey also oversaw.
In the years after acquiring DirecTV, Stankey eliminated most of the company’s top leaders, changed the satellite TV strategy to digital-first, and ended marketing campaigns touting the advantages of legacy technology.
The results have not been good.
AT&T ended the third quarter with about 17 million legacy TV subscribers (both DirecTV and U-Verse), down more than 16% from a year earlier. While all pay-TV distributors have lost customers in recent years, AT&T has lost the most — about 8 million video subscribers since early 2017. For comparison, Comcast has lost about 3 million residential video customers over the same period, dropping from 22.5 million to 19.2 million.
And if you want to look at another examples of grinding old axes to chop down current disasters, old-timer media journalists Peter Bart and Mike Fleming Jr look at the whole siutuation and astutely compare the Telephone People invasion of Hollywood to an earlier failed invasion. Bart writes:
The “techie” invasion of Hollywood had long been predicted. Indeed, it had even played out a generation ago. With dire results. The first invasion occurred around 1990 when both Sony and Matsushita, the Japanese giants, noticed the giant technological change about to overtake Hollywood and asked this question: Since we’re making all the hardware, why don’t we make the software, too.
Sony bought Columbia and Matsushita bought MCA/Universal. It was all very organized and conceptually sound. The invasion of Hollywood had been accomplished. Except it didn’t work. Variety’s famous banner, printed in Japanese, declared: Buyer Beware. Matsushita’s top executives immediately clashed with those of MCA. Lew Wasserman, the dethroned king of Hollywood, let it be known that the Japanese had no idea what they were doing and he wouldn’t help them. Within six years Matsushita sold 80% of its holdings taking a $1.5 billion loss. Sony was more stalwart. They had spent hundreds of millions on expensive production deals but by 1994 announced a write-off of $2.7 billion and said they were starting over. They’re still hanging in there. But with the arrival of 2000 the handwriting was on the wall. The Japanese, Chinese and Europeans had all tried to confiscate Hollywood and had concluded they didn’t have the knack. Now the techies and bellheads are having a try.
Hollywood certainly runs on its own oddball rules, but “content is king” is still one of them. Pissing off your suppliers is not a great way to serve customers, something Kilar keeps talking about, as he’s quoted in THR: “The best way to find success in business, and certainly with the Internet, is to start with the customer. If we start our days and end our days focused on the customer, we’re going to lead the industry.”
Spitballing here, but AT&T’s view of customer needs seems to be limited to giving them a brightly lit series of moving images to watch from a sofa; the nature of those images seems to have them flummoxed. Or to paraphrase the Underpants Gnomes: Step 1 start streaming service; Step 2 ??; Step 3 PROFIT!
Meanwhile, Fleming reports, Legendary, the producer behind Denis Villenueve’s Dune and Godzilla vs Kong, is considering writing some strongly worded letters.
I’m hearing that Legendary Entertainment either has or will send legal letters to Warner Bros as soon as today, challenging the decision to put the Denis Villenueve-directed Dune into the HBO Max deal, and maybe Godzilla vs Kong as well. On the latter, Legendary reportedly had Netflix ready to pull the film from Warner Bros for around $250 million, before WarnerMedia blocked it. Sources said Legendary had no advance notice before last week’s announcement that both Dune and Godzilla vs. Kong were part of the HBO Max plan.
Theater-chain owners are similarly upset, but already battered down by lockdowns, their cries of outrage are but feeble yawps at this point, alas.
You could argue that WB didn’t have much choice in the matter of how to get their films out there, with domestic theaters closed for the foreseeable future. Still, Dune isn’t coming out until October and who the hell knows how the world will be by then.
Taking a bird’s-eye view of this whole flaming dumpster, one begins to suspect that the puzzling changes at DC Comics are, rather than an outlier, a mere synecdoche for the greater disarray at AT&T and WB. The AT&T crew doesn’t seem to have much skill at making the content to stream on all their platforms, and are doing a fine job of acting like they want to drive away the people who do. It’s the same tone-deafness of Kilar’s insistence that customers are #1 while steamrolling everything that fans like about DC. You don’t keep your customers happy by taking away the things that made them happy.
According to several reports, some observers think that AT&T will eventually sell off WarnerMedia — the costly, mercurial world of entertainment will be too big a drag on their stock price. That would be a sad outcome, but if that day comes, you won’t be able to say it came as a surprise.