Notations From the Grid (Weekly Edition): On Media Watch

 

The Briefing  By Martin Peers AT&T’s agreement to sell WarnerMedia to Discovery ends the telecom firm’s six-year dalliance with the entertainment industry, which as expected turned out to be an egregious waste of shareholder money and management attention. Including its DirecTV acquisition, AT&T spent $126 billion and assumed billions of dollars more in debt on two deals that will go down in the history of corporate America as among the most ill-conceived pair of acquisitions ever. And don’t listen to any AT&T executives who claimed the industry changed faster than they expected: Evidence was abundant six years ago that cord-cutting was eroding both satellite TV and entertainment.  AT&T even had plenty of time to back out of the Warner purchase, given that the deal’s closing was delayed while the Justice Department sued to block it. (It will be fascinating to see if the same antitrust regulators who tried everything to block AT&T’s purchase of what is now called WarnerMedia now attempt to block its unwinding.)  Having said all that, it’s worth pointing out that for WarnerMedia itself, AT&T’s ownership was probably healthy. AT&T forced WarnerMedia to make the necessary cost-cutting and restructuring to be more competitive in a digital age when the fat profits from cable TV are weakening. Jason Kilar’s management brought a more consumer-focused mindset that was long needed at a TV company. In fact, the biggest tragedy of this deal is that Kilar won’t be around to see through what he started. (For more details, see our coverage here and here.) In the same vein, Discovery CEO David Zaslav noted today that AT&T made WarnerMedia more appealing by reacquiring international rights to programming that had previously been sold off. That’s all good… except that it’s not AT&T’s job to be a fixer-upper of companies in structurally challenged industries. That’s a role best left to private equity or another kind of investor. If AT&T made a big profit from this, they could be forgiven. But it took a writedown on DirecTV and it wouldn’t be surprising if the same thing were to happen with WarnerMedia. If there was any justice in the world, former CEO Randall Stephenson, who led both acquisitions, would return the bonuses he made over the past five years.   AT&T’S REVOLVING DOOR OF DEALS AT&T has a long history of buying companies and then spinning them off a few years later after things don’t work out. Which fell apart the fastest? It’s not WarnerMedia, as it turns out. Check out this sorry history. 1991: AT&T buys NCR for $7.4 billion. Five years later, AT&T spins it off. 1999: AT&T buys cable firm Tele-Communications Inc. for around $50 billion. In late 2001—two and a half years later—AT&T says it will spin off what it now calls AT&T Broadband and merge it with Comcast (sound familiar?). That deal was completed in late 2002. 2015: A new version of AT&T, under different management, buys DirecTV. In early 2021 AT&T sells a big stake in DirecTV, beginning the process of extricating the telecom firm from the satellite TV firm. 2016: AT&T agrees to buy Time Warner in a deal described by Randall Stephenson as a “perfect match.” Deal closes in mid-2018. In May 2021, AT&T decides to spin off what it now calls WarnerMedia and merge it with Discovery. COULD A LION BE HEADING FOR AMAZON? Is this why Jeff Blackburn came back to Amazon? Amazon is in talks to acquire MGM, we reported today. Purchase of the storied film and TV company would beef up Amazon’s Hollywood resources, giving it a vast film library (James Bond, Rocky, Pink Panther) and a TV production company making reality shows like “Shark Tank” and dramas such as “The Handmaid’s Tale”. It would all be perfect for Amazon Prime Video and IMDB.