AT&T Inc.’s T 1.17% WarnerMedia is restructuring its workforce as it seeks to reduce costs by as much as 20% as the coronavirus pandemic drains income from movie tickets, cable subscriptions and television ads, according to people familiar with the matter.
The overhaul, which is expected to begin in the coming weeks, would result in thousands of layoffs across Warner Bros. studios and TV channels like HBO, TBS and TNT, the people said.
“Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic,” a WarnerMedia spokesman said, adding that the company would reorder its operations to focus on growth opportunities. “We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.”
The coronavirus pandemic is splitting the U.S. economy. Many white collar workers have been able to work from home, while many service jobs have been lost. Sectors such as entertainment and travel have been hobbled, while grocers and cloud-service providers have had an unexpected boost in demand.
U.S. airlines are preparing to cut thousands of jobs after their federal stimulus funds ran out. The owner of Regal Cinemas, the No. 2 U.S. theater chain, has suspended its operations because studios are delaying new releases. On the flip side, FedEx Corp. posted record quarterly revenue from a surge in ecommerce packages and McDonald’s Corp. said Thursday its U.S. sales have bounced back because of its restaurants’ drive-through windows.
AT&T’s 2018 acquisition of Time Warner exposed it to some of the uncertainty of running an entertainment business. The company’s DirecTV satellite unit has lost millions of customers over the past two years and its cable networks are suffering along with the rest of the industry as cord-cutting pushes viewers toward cheaper online entertainment options.
This is the second wave of significant cuts at the company. In August, WarnerMedia eliminated more than 500 jobs at Warner Bros., the studio famous for “Casablanca” and the “Harry Potter” series.
WarnerMedia employed nearly 30,000 people earlier this year, a person familiar with the matter said. Its parent company employed 243,000 people at the end of June, although the overall head count has declined in recent years through layoffs and attrition.
The move is the latest by WarnerMedia chief Jason Kilar to remake the Hollywood icon since he took control of the division in May. The former Hulu boss ousted many of the unit’s top executives in August and rolled all production operations into a single unit under Warner Bros., suggesting more positions could be at risk.
AT&T has staked much of its media-focused strategy on HBO Max since the streaming video service launched in late May. About 4.1 million subscribers had activated the entertainment app about a month after its launch, lagging behind cheaper rivals from Netflix Inc. and Disney. Overall HBO subscriptions, which include viewers watching the slimmer premium channel through cable TV bundles, still rose to about 36 million.
That early growth hasn’t offset deeper declines at the commercial entertainment cable networks TNT, TBS and TruTV, which used to be known as the Turner networks. The company’s other cable networks include news channels CNN and HLN as well as Cartoon Network.
TBS and TNT dodged disaster this summer once professional baseball and basketball games returned, bringing viewers and ad dollars back after months of reruns. But the TV advertising market has yet to recover, and the networks are expected to report higher sports-rights costs in the third quarter that could further erode their profitability.
The virus has also wreaked havoc on Warner Bros. movie business. It released the expensive science-fiction movie “Tenet” when theaters around the country were just starting to reopen, a gamble that didn’t pay off as box office results were disappointing although it performed better abroad.
The studio recently pushed “Wonder Woman 1984” from an October open to year’s end. “Dune,” which was supposed to open during the holiday season, won’t premiere until next year at the earliest, and “The Batman” has been bumped to 2022.
While much of the cutting is tied to the effect of the virus on WarnerMedia’s core businesses, the company is also pivoting its content strategy and consolidation operations as a result.
Warner Bros. TV, which has historically produced content for all broadcast, cable and streaming platforms, is now being encouraged to focus solely on making content for sister platforms like HBO Max. That has driven the company to cut staff, particularly on the distribution side.
NBCUniversal has undergone a similar streamlining process. It has combined programming operations for its broadcast, cable and streaming platforms under one umbrella, which has led to significant cuts in staff.
AT&T Chief Executive John Stankey said in a recent interview with The Wall Street Journal that the company’s media bets will take years to pay off but were the right choices long-term. He also said the company was reviewing all its operations. “There’s nothing that’s sacred anywhere in the business,” he said. “WarnerMedia is no exception to that.”
AT&T agreed to pay about $85 billion for Time Warner in 2016, but the deal was held up for nearly two years by a federal antitrust challenge. AT&T shares have fallen about 28% this year, lagging behind rivals like Comcast and missing out on the stock market’s record run.
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Appeared in the October 9, 2020, print edition as ‘Parent of HBO, TBS Plans Big Job Cuts.’