HBO, Turner Shakeups Foreshadow More Disruption as AT&T Asserts Control

AT&T’s plans to reorganize WarnerMedia had been expected for months. But the telecom parent’s aggressive moves to shake up the media giant’s senior management ranks and begin consolidating key divisions have left company executives reeling and bracing for further turmoil.

The sudden forced departures of two veterans — HBO chief executive Richard Plepler and Turner president David Levy — arrived ahead of the hiring of former NBC Entertainment boss Bob Greenblatt to a top role overseeing WarnerMedia’s combined TV platforms and its coming streaming service. The moves are widely viewed as a precursor to the decampment of more executives, hundreds of layoffs and other structural changes as AT&T continues to realign its prized asset. Already, AT&T has more or less combined its HBO and Turner TV units.

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Even in a media sector where the pending merger of Fox with Disney, and the likely reunion of the on-again, off-again shotgun wedding of CBS and Viacom, have made uncertainty the norm, the shake-up at WarnerMedia is seismic — and it promises to rock the industry further in the weeks to come. On March 4, shares of AT&T were down more than 2.7%, or 84￠ per share, to $29.98 amid a broad market decline.

“There was always going to be a reorganization of some sort,” says Tuna Amobi, a media-industry analyst with CFRA research. “What we didn’t know was that the reorganization was going to involve the departure of two of the key leaders.”

The WarnerMedia announcement in effect means the end of the old HBO and Turner cultures as the industry knew it. Plepler was among the last of TV’s old guard showmen — an erudite executive who would discuss in-depth magazine articles and think tank studies with his producers beyond just reading the latest script. That sophisticated touch was one of the elements that made HBO stand out from its competitors, and that unique culture kept HBO as an island unto itself throughout the Time Warner years. Meanwhile, the decision to piecemeal Turner’s assets under Greenblatt, Jeff Zucker and Kevin Tsujihara breaks up the company that was founded decades ago by Ted Turner. Turner Broadcasting, the Atlanta-based entity founded by the legendary media iconoclast on the back of a local UHF TV channel-turned-superstation, effectively no longer exists.

As the industry focuses more intently on reaching viewers through streaming, AT&T is betting it can build the WarnerMedia of the future without the architects who constructed its very lucrative present. Plepler and Levy found themselves out in the cold when AT&T installed its own John Stankey atop WarnerMedia last year after the telecom giant completed its $81 billion purchase of the erstwhile Time Warner. The company is expected to debut a direct-to-consumer streaming service later this year. Many traditional media companies are organizing themselves to do battle with big broadband-content players like Netflix and Amazon, and may look to AT&T’s quick reorganization and wonder if it will be the status quo for a sector that is in flux.

Greenblatt tells Variety he has no illusions about the uphill climb that lies ahead. “We all really do understand the world we are living in. We know there are a couple of big direct-to-consumer platforms already up and running. We know Disney is hard at work,” he says. “At the same time, everybody over here believes that given the combined assets of this company, we have a really great chance of being in that game in a signficant way. I think each one of these [competing] platforms will be very distinct from the other. Will we be as voluminous as Netflix? No. Do we have the plethora of name brands as Disney? No. What we do have are brands that are really significant, starting with HBO.”

The tumult at HBO started last week as word surfaced that Greenblatt was in talks for a high-level gig that would erode HBO’s long-cherished autonomy, starting with the authority of Plepler. As Stankey plotted a reorganization of key TV assets, he never turned to the HBO chief — one of the most distinguished content executives in his stable — to discuss a bigger job piloting the company’s streaming future.

Levy, meanwhile, was offered a role overseeing the company’s sports properties. But he has for several years worked with the ambition of being CEO of Turner. He discovered that job is not likely to exist going forward and felt running only sports would represent a lateral move.

“It was time to move on,” says Levy in an interview. “I was talking to Stankey and discussing the future, his vision of the company, as well as my own aspirations, and they weren’t lining up.”

One could argue that WarnerMedia is ripe for a makeover. For years, Time Warner was really an amalgam of fiefdoms that maintained arm’s-length distance from one another. HBO, Warner Bros. TV and Turner were able to operate autonomously, even as most of Time Warner’s rivals long ago put all of their networks and studios under the same oversight.

Yet, having a WarnerMedia without the likes of Plepler and Levy would, just days ago, have been unthinkable. Now that AT&T is seizing control of the company’s operations, employees need to wrap their heads around that concept quickly.

“Seeing all these alums depart can be a little bit worrisome, because they were considered ‘A’ players,” says Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management.

“It was time to move on. I was talking to Stankey and discussing the future, his vision of the company as well as my own aspirations, and they weren’t lining up.”
David Levy, former Turner president

It is not clear, meanwhile, that all WarnerMedia executives will welcome Greenblatt with open arms. Top company insiders anticipate more high-level departures in the days to come. Some prominent players are staying. Kevin Reilly, the Turner content chief tapped last year to head programming for the WarnerMedia streaming service, is a cable and broadcast veteran whose career as a programming exec has long run parallel to Greenblatt’s. CNN Worldwide president Zucker will add oversight of Turner Sports to his plate. Donna Speciale, president of Turner Ad Sales, who reported to Levy, is expected to stay at the company, according to a person familiar with the matter.

The reorganization had been expected for some time, particularly because AT&T held WarnerMedia separately from the rest of its operation as it awaited the results of a federal appeals process after the U.S. Department of Justice contested approval of the purchase. There have always been synergies to realize through back-office consolidation and elimination of overlapping roles. But the decision of a federal appeals court Feb. 26 to throw out the Justice Department’s last-ditch challenge to the merger effectively unshackled AT&T, freeing it to begin breaking down silos that existed at the Warner Media brands.

AT&T’s bet carries risk. Plepler’s easy access to top producers and actors is nothing to dismiss. The exec had been known to show up alongside comedian John Oliver during a routine meeting with the press to hype his “Last Week Tonight,” and to defend outspoken host Bill Maher during times of controversy. People who work at HBO praise the outsize creative freedom they get for the series they produce for the outlet.

Nor is Levy’s link to sports figures to be taken lightly. The NBA’s alliance with Turner is closer than the usual league-network relationship — and a key reason why Turner won a nine-year extension to its deal starting in 2016 to show pro basketball. Turner and the NBA jointly manage assets such as NBA TV, NBA.com and NBA Mobile.

Levy “is someone I’ve been talking to on an almost daily basis during my entire time at the NBA, through my various jobs and his various jobs,” NBA Commissioner Adam Silver tells Variety, adding, “We have a strong relationship with the new AT&T management team, and we will continue to have a very productive and meaningful relationship with them. I would have loved to continue working directly with David Levy, but I understand that’s how things work.”

The autonomy that once allowed the WarnerMedia brands to flourish has, in recent years, become the target of skepticism. Functions such as marketing, business affairs and finance could, in theory, be run more efficiently across brands.

Then there’s programming. Turner’s TNT last year launched an ambitious drama series based on Caleb Carr’s much-loved novel “The Alienist.” And the debut date is nearing for “The Snowpiercer,” a drama about humanity escaping from a frozen Earth by taking up residence in a giant train that circles the globe; the series is based on a French graphic novel that was the source of the 2014 film starring Chris Evans and Tilda Swinton. Programs of such scale are typically the stock in trade of premium brands like HBO rather than basic cable.

“For those of you who have studied [Time Warner] over the years … there was an era where it was very profitable for each [unit] to go at it essentially in its own lane,” Reilly said earlier this month at Turner’s presentation at the Television Critics Assn. press tour. “There was not a lot of overlap. What we’re finding at this moment in time now [is] we are a stronger company really going at it together.”

Greenblatt will be charged with directing which assets go where. Under a new structure, programming budgets are likely to move around to give HBO more money to play with — a goal AT&T executives have not been shy to describe. Existing development and series could shift to different outlets. And all of the company’s production entities (including HBO and Turner in-house units) are likely to be consolidated under one WarnerMedia roof.

The Turner networks are the assets most significantly affected. CNN (and sister HLN) and Cartoon Network (with sister Adult Swim) will be placed under different divisions; the news networks will reside under a new news-and-sports unit helmed by Zucker, and the kids’ outlets will operate under Tsujihara at Warner Bros. TNT, TBS and truTV all develop programs that could thrive in the same lanes as HBO and the new streaming outlet. At the same time, WarnerMedia will have to be careful how it shifts resources away from TBS and TNT. Those networks still churn out billions of dollars of income thanks to subscriber fees and advertising.

“If you’re them, you’re thinking not what this looks like next year but what this looks like in seven years,” says one WarnerMedia insider. TNT could very well zoom in on sports, which drives a chunk of its viewing, while TBS keeps its comedy mandate. Ultimately, however, the networks may shift to becoming more of a secondary window for programming that first appears on the new streaming hub.

No one can fault AT&T for wanting to play with its new toy. The telecommunications giant has every right to run WarnerMedia as it likes. Now it has to prove it can do it better than some of the people who have left.

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