Craig Moffett, a veteran Wall Street analyst who has been tracking AT&T along with the larger media, telecom and digital realm for more than a generation, cast a wary eye on the management reshuffling at AT&T’s WarnerMedia.
In a blog post this morning, the influiential MoffettNathanson partner said the news of Bob Greenblatt’s arrival, promotions for other execs and the exits of Richard Plepler and David Levy can be viewed either optimistically or pessimistically. “The glass half-full view is that Time Warner needed to be shaken up,” Moffett wrote of the asset rebranded as WarnerMedia. “The separate silos at Turner and HBO generated tens of millions – perhaps even hundreds of millions – of dollars of excess cost.” Centralizing operations, he added, is a prevailing strategy and the oddly anti-synergistic fiefdoms that long existed at Time Warner make little sense in the hyper-competitive streaming derby.
However, Moffett cautions, the flip side of that coin is a potential talent exodus that could be signaled by the departures of Plepler and Levy after nearly 60 years of collective service. While WarnerMedia has pushed back at the Wall Street Journal‘s forecast for “massive layoffs,” cuts are definitely on the way. Moffett describes the loss of talent in the senior ranks as a “worst-case scenario” for AT&T.
“There is nothing more critical in a media company than talent and the personal relationships that that talent brings,” he wrote. “It therefore follows that retaining talent is job one. In this regard, AT&T starts with one strike against them. The cultures of a phone company and a media company couldn’t be more different, and one can imagine that WarnerMedia executives were therefore already on edge.”
Investors are not enthused by the news today, sending AT&T shares down more than 3% to $29.78 in mid-day trading, though overall markets are also in the red.
Even before the latest wave of announcements, Moffett speculated (accurately, based on Deadline’s reporting) that many of the rank-and-file “at best was nervous and at worst had one foot out the door.” That state of affairs will lead to a “cultural challenge” that “simply can’t be overstated,” Moffett wrote. While AT&T has repeatedly offered assurances — even within 24 hours of the Plepler news — that it would “shield WarnerMedia from a financial beancounter” (in CFO John Stephens’ phrase), the company has also started red-penciling expenses. First-class flights and events costing $100,000 and up are reported to be under the microscope. (Stankey dismissed this report emphatically in a subsequent interview with Deadline, asserting that layoffs would be “at the margins” and denying there had been any changes to the company’s T&E policy.)
“We’ve seen this movie before,” Moffett wrote. “Those of us with enough gray hair will recall that previous attempts to blend the cultures of telephone companies and media companies have all ended badly.”
Moffett calls the news in recent days “at best disquieting, and, at worst, alarming.” He notes that the main silver lining for workers at Turner and HBO is that Greenblatt is “a well-known quantity from Media-land, not TelCo-land, which must be at least somewhat reassuring.”