As the news sank in about AT&T winding down its Hollywood foray via a $43 billion merger of WarnerMedia and Discovery, one word summed up the film industry’s prevailing reaction.
Not only does the deal end the three-year shadow cast by AT&T, numerous sources told Deadline, but it averts another scenario — a tie-up with NBCUniversal — with more dire implications.
The climate at AT&T-run WarnerMedia is already showing signs of shifting even before the deal close, which is expected in mid-2022. Deadline hears that Dune, the high-profile Denis Villeneuve sci-fi remake out this fall, will not adhere to the day-and-date release pattern established for the entire 2021 slate. Instead, it will premiere in Venice in September and then enter theaters for a time before finding its way to streaming service HBO Max.
Addressing the deviation in release plan, Warner Bros distribution chief Jeff Goldstein said there was “no change” to the October 1 date for Dune. The film, like the rest of the slate, will open in theaters the same day it arrives on HBO Max, he said.
Few mergers are perfect, and the time between now and the completion of the Discovery-WarnerMedia transaction promises to be a stretch with yet more uncertainty and executive comings and goings. But numerous people in the film world Deadline spoke with felt a newfound sense of optimism about life under David Zaslav. The longtime Discovery boss, who will run the combined entity, is perceived as more industry-savvy and talent-friendly than the current regime at the top.
For more than three years, three of the most storied brands in entertainment — nearly century-old Warner Bros and HBO and Turner, both cable pioneers born in the 1970s — labored under adverse conditions. Soon after the close of AT&T’s $81 billion acquisition of Time Warner in 2018, workers faced tumultuous rounds of staff cuts as silos were broken down between long-autonomous divisions.
Multiple waves of restructuring sought to impose order at the same time a clock was loudly ticking down to the launch of streaming service HBO Max. While some degree of streamlining is inevitable in any merger, Dallas-based AT&T never displayed much of a feel for Hollywood. That culture clash reached its peak at the end of 2020, when WarnerMedia CEO Jason Kilar — who had been hand-picked by AT&T CEO John Stankey — led what was referred to internally as Project Popcorn. That initiative put the entire 2021 Warner Bros slate (with Wonder Woman 1984 a test balloon last Christmas) on HBO Max at the same time it hit theaters.
Now, Kilar is reportedly negotiating his exit, having only learned about the merger plan on Saturday, sources say. The timing was awkward in another way — Kilar was the subject of a rigorously reported but largely favorable Wall Street Journal portrait that went online Friday. Headline: “The HBO Max Boss’s Script for a New Hollywood.”
Warner Bros had already reached a deal with Regal Cinemas to restore exclusive theatrical windows in 2022 before titles go to streaming. Given the Regal deal and other indications of the industry shifting back toward some theatrical exclusivity, the idea of Dune following a different path is not a shock, but it is plenty symbolic. Kilar’s insistence on ramming through the day-and-date approach earned him no shortage of resentment, even though dozens of profit participants have been paid out in settlements assuming success.
Kilar’s scheme did, to be fair, prove successful for releases like Godzilla vs. Kong and Mortal Kombat, which both piled up sizable theatrical grosses by pandemic standards while also appearing to boost HBO Max subscriber levels. (The company added 2.7 million new customers in the first quarter, before those films came out.)
Less certain is the effect on prestige films that rely on theatrical for word of mouth. Filmmakers like John Lee Hancock, whose longtime dream project, The Little Things, went out via HBO Max day-and-date in February, publicly criticized the setup. In an exclusive interview with Deadline, Hancock called it a “shock” and a misguided solution delivered by corporate brass separate from the Warner Bros team, with whom Hancock said he had built trust.
Zaslav and whatever team he assembles, then, face a significant task in winning back the fealty of the creative community. And this at a studio known for nurturing auteurs like Stanley Kubrick, Clint Eastwood and Christopher Nolan. Warner Bros just prior to the pandemic had released unexpected work like Joker., which took months to go from festival darling to massive global blockbuster and multiple Oscar nominee. Now, it has been reduced to making what Hancock decried as a “one-size-fits-all declaration” that streaming trumps theatrical.
Kilar seemed to sense that he had overplayed his hand. “There’s no doubt that it was bumpy back in early December of last year,” he told Recode in April. “If I had the chance to do it over again, I think it’s very fair to say that we would have taken a couple more days to see if we could have had even more conversations than we were able to have.”
Zaslav, by comparison — though he has specialized in dealmaking, sales, sports and unscripted TV, but never film — has a more innate feel for the town’s dynamics. A fixture for decades in industry circles, with a billionaire “best friend and mentor,” as Zaslav called him this morning, in Discovery chairman John Malone, Zaslav is seen as capable of massaging a message. He bought producer Robert Evans’ Beverly Hills home, Woodland, in 2020, and talked today about occupying an office on the Warner lot. These are not familiar overtures during the years since Jeff Bewkes signed the merger papers in 2016, what feels like a lifetime ago.
“David really understands relationships,” Imax CEO Rich Gelfond said during a CNBC interview after the deal. “He really has a human touch and he really understands how business gets done and how it works and that it’s lot more than algorithms. He would know how to handle difficult situations. He’s been an innovator and he knows how to innovate but he is going to know how to do it within the confines of the existing system and I think he’s going to do it in a diplomatic, soft-touch way.”
In a press briefing discussing the deal, Zaslav said the “best and the brightest” would be assembled from Discovery and WarnerMedia’s full teams. Efforts would be focused on trying to “get the best people to stay,” though he didn’t elaborate. The structure and team at WarnerMedia, established during Kilar’s tenure, includes key figures like Ann Sarnoff, chair and CEO of WarnerMedia Studios and Networks Group.
There will certainly be stresses and points of friction to address across the new Warner Discovery (working title). AT&T was making it hard for Warner Bros to operate like a major movie studio should, troops there say, because the purse strings have been so tight. The telecom giant, which needed to prioritize vast capital expenditures on wireless networks and 5G technology, showed minimal appetite to invest in content, insiders say. Moves had to be made long in advance, a limiting factor in a fast-changing landscape where risky decisions often have to be made on a dime.