In the wake of a mega-deal with Discovery that seems primed to shake up the media landscape, AT&T chief John Stankey and WarnerMedia CEO Jason Kilar urged employees to stay focused on their jobs while they wait for the pact to close.
“During this period, our direction and mission remain the same,” Stankey wrote in a staff-wide memo obtained by Variety. “The market and product strategies underway across WarnerMedia are consistent with a merged, post-close company. So during the review period, we will support and commit to delivering on WarnerMedia’s full aspirations and capabilities with regards to the existing strategy and business plans. There will be no waiting on direction, hitting the pause button, or resting on our market position in the coming months – only continued forward drive and progress.”
For his part, Kilar also argued that staff needs to stay focused while the companies try to obtain regulatory approval for the merger between Discovery and WarnerMedia. The deal comes as HBO Max is continuing to work to add subscribers and to stake out a place for itself in the crowded streaming space.
“I want to stress how important I believe it is in this moment for us to continue to keep our focus and to live up to our potential as a team,” Kilar wrote. “As I shared last month in the context of our first quarter’s results, there is so much wind in our sails. This kind of momentum is hard earned but easily lost.”
The deal will leave Discovery CEO David Zaslav in charge of the combined company. On a press conference, Zaslav had complimentary things to say about Kilar and top WarnerMedia executives such as CNN head Jeff Zucker and Warner Bros. chief Toby Emmerich. However, some of these executives could lose out in the merger.
Shedding the media business gives AT&T greater financial flexibility as it works to expand its 5G network. The telecom will receive $43 billion in a combination of cash, debt securities and WarnerMedia’s retention of debt. It will also have a 71% ownership stake in the new venture. Merging with Discovery will give the new enterprise approximately $20 billion in combined spending firepower when it comes to producing new shows and movies.
“It is becoming clear that WarnerMedia has effectively demonstrated its right to lead in the future media landscape,” Stankey wrote. “However, we are now in a world where relevance and future success will be tied to greater scale and growth globally. To be one of the best global media companies requires not only broad and deep creative assets, but an investor base and access to capital to make it happen. The decision to combine WarnerMedia with Discovery is rooted in this conclusion.”
AT&T announced its purchase of Time Warner in 2016 and had to wait until 2018 for the deal to close. It’s been a disruptive period, one that’s seen the launch of HBO Max, as well as a global pandemic that’s upended the film business. That’s to say nothing of the layoffs that accompany these kinds of mergers.
“I will admit that I am personally disappointed and sad that I will not have the opportunity to continue this journey with you, but I am incredibly optimistic and enthusiastic about the future of the combined WarnerMedia and Discovery,” Stankey wrote. “I intend to retain every share of stock I receive in the new entity and enjoy the fruits of your continued success. I see nothing but a bright future as the collective capabilities of the combined companies are unleashed!”
Here are the full memos:
To My WarnerMedia Coworkers,
A few minutes ago, we announced our intent to merge WarnerMedia with Discovery, with the new company post-close being led by David Zaslav. Even though there has been recent press speculation on our future, I suspect today’s news is a bit surprising — which is why I’d like to share how we arrived at this decision.
First, this opportunity is afforded and necessitated by the success of a challenging and hard-fought evolution underway at WarnerMedia. And it’s a credit to your hard work. Since 2018, we have embraced how customers are experiencing entertainment and media and have worked to shape new business models.
It is becoming clear that WarnerMedia has effectively demonstrated its right to lead in the future media landscape. However, we are now in a world where relevance and future success will be tied to greater scale and growth globally. To be one of the best global media companies requires not only broad and deep creative assets, but an investor base and access to capital to make it happen. The decision to combine WarnerMedia with Discovery is rooted in this conclusion. WarnerMedia’s continued evolution to direct relationships with customers will be accelerated, enhanced and secured by this decision. I am confident this will be an important milestone as we look back with pride and satisfaction that our efforts, brands and intellectual property were central to creating a flourishing and growing global media platform.
The complementary nature of this combination of companies is critical. It allows for two important things. In our core linear business, a combined offering of programming will stretch across the most powerful advertising demographics and will strengthen the combined company’s value proposition in fast evolving markets. Further, the programming line-up broadens our audience and will deliver more value to our distribution partners. In our direct-to-consumer efforts, we add an important and popular content genre, coupled with the strengthening of our upcoming effort to scale internationally.
While overlap in our creative and content capabilities is virtually non-existent, there will be opportunity to redirect investment away from duplicative back-office, support and administrative functions into our growth strategies. This reality is a necessary part of our journey to reposition the company. Answers on how that will play out won’t be immediate, but you can observe from the Scripps/Discovery integration that a deliberate and balanced approach to capitalizing on the combined strengths of the two companies is David’s track record and overall objective.
Second, having shared why I feel this is the right move for the market and the sustainability of WarnerMedia’s success, let me make a few comments about another important stakeholder — our owners. Your efforts since 2018 have set WarnerMedia on a solid path to creating significant value for our shareholders. You see this reflected in the transaction’s economic terms. This opportunity for WarnerMedia to ascend into the position of a leading global media company would not be possible had it not been for the combined capabilities of Time Warner and AT&T. This journey started based on management’s conviction and willingness to invest to reposition WarnerMedia for direct customer relationships.
Those of you close to this know that the unique combination of AT&T’s distribution expertise, broader trading relationships and competitive market position, coupled with WarnerMedia’s remarkable brands and content were both necessary to establish HBO Max, which is on its way to creating substantial future value. I have said many times how proud I am of what this team has accomplished under challenging circumstances and timeframes. The adversity and obstacles you conquered over the past few years are understood by few. Now it’s time to take the next step in WarnerMedia’s evolution to be a global media leader — not just for the next year, but for the next decade and beyond. That’s what this transaction does. It gives this company every tool needed to achieve its full potential.
Any time a change like this occurs, there is speculation about alternatives. While I won’t detail our careful deliberations across a broad consideration set, I can tell you that we made a choice that I firmly believe is the absolute best choice. The success and momentum of WarnerMedia allows us to author our position in a fast-evolving industry landscape.
The Discovery team is a capable, creative and wonderfully successful group that has enjoyed remarkable success. Importantly, that success has come in segments and content genres highly complementary to WarnerMedia’s capabilities. David and his management team share the same conviction on driving the evolution of the business model as we do. He has tremendous respect for the people and achievements of our company and believes the talent and skills of both companies are instrumental to future market success.
A final note on the pending period before final approval. We believe the complementary, pro-innovation and pro-competitive aspects of this transaction will drive a straight-forward review by the governing regulatory bodies. During this period, our direction and mission remain the same. The market and product strategies underway across WarnerMedia are consistent with a merged, post-close company. So during the review period, we will support and commit to delivering on WarnerMedia’s full aspirations and capabilities with regards to the existing strategy and business plans. There will be no waiting on direction, hitting the pause button, or resting on our market position in the coming months – only continued forward drive and progress.
I will admit that I am personally disappointed and sad that I will not have the opportunity to continue this journey with you, but I am incredibly optimistic and enthusiastic about the future of the combined WarnerMedia and Discovery. I intend to retain every share of stock I receive in the new entity and enjoy the fruits of your continued success. I see nothing but a bright future as the collective capabilities of the combined companies are unleashed!
We will keep you updated as our planning for the transaction’s completion progresses. Pascal will join me tomorrow in a video session to answer your questions and further discuss the transaction. David will also be addressing the broader audience in the coming days. I look forward to our continued discussion.
John
__________
Team –
By now you likely have read a fair bit about the news of WarnerMedia and Discovery reaching a definitive agreement to combine. Between the recent company-wide email and tomorrow’s Town Hall, John Stankey and Pascal Desroches have done and will continue to do a very strong job of sharing the details and context of the transaction with the entire team.
The purpose of this email is two-fold.
First and most importantly, I want to say thank you to every one of you. The pride, passion and affection I have for this team – for each of you – and this company are impossible to communicate. I don’t take any days on the WarnerMedia team for granted, it is an honor to get to serve our customers and to get to serve you in this role. Whether I am heading onto the lot in Burbank or into the lobby at Hudson Yards (or elsewhere), I feel like the luckiest person on the planet. I am so thankful for all that you do and for every precious day I get to be on this team in this role.
Secondly, I want to stress how important I believe it is in this moment for us to continue to keep our focus and to live up to our potential as a team. As I shared last month in the context of our first quarter’s results, there is so much wind in our sails. This kind of momentum is hard earned but easily lost. I’m thankful that today’s momentous news comes during a stretch where our focus happens to be particularly intense: we’re going to host our Upfront this Wednesday, we’re going to drop the Friends Reunion next Thursday, the ensuing week brings the launch of an ad supported HBO Max, In The Heights premieres the following week, and at the end of June HBO Max will be going live in 39 additional countries. That is a pretty good six-week stretch and there is so much more to come on the heels of it (21 additional launches across Europe, DC FanDome, our strongest stretch of motion picture releases since the pandemic started, vital work over at CNN, and much more). This is a defining moment for us. And I recognize that it will take all we’ve got to keep collective focus on the mission. We can do it 🙂
On this day and on all days…thank you so much to the best team out there.
Jason
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