T AT&T Inc

By Joe Flint 

BURBANK, Calif. -- Jason Kilar might have a career as a tour guide if this WarnerMedia chief executive gig doesn't work out for him.

On a recent stroll through the Warner Bros. lot, Mr. Kilar eagerly pointed out where the James Dean classic "Giant" and the cult hit "Gilmore Girls" were shot. He shared arcane details on how big the sets are for the new show "The Sex Lives of College Girls" that Mindy Kaling is creating for the company's year-old streaming service, HBO Max. He waxed on about the artifacts in the studio's new museum, including props used in Humphrey Bogart movies and Christian Bale's "Batpod" motorcycle from the Dark Knight movies.

When an extra from an episode of "You," the Warner Bros.-produced Netflix Inc. hit shooting on the lot, approached to ask where the nearest bathroom was, Mr. Kilar had that answer too.

Being able to point out restrooms is part of the CEO's job, he joked.

Mr. Kilar, 50 years old, obtained his education in all things Warner Bros. through many solitary walks on the lot since he joined the AT&T Inc. division as CEO about a year ago, four weeks before HBO Max launched. The Covid-19 pandemic forced the studio to shut down, but Mr. Kilar -- having grown tired of conducting business from his wife's vanity table in their bedroom -- began to show up at his new office on a regular basis. He then decided the walks would be the best way to get to know his new co-workers. A former CEO of Hulu and longtime Amazon.com Inc. executive, he also oversees CNN, TNT and TBS -- all part of AT&T's $81 billion WarnerMedia acquisition in 2018.

In his first year on the job at WarnerMedia Mr. Kilar has done a lot more than familiarize himself with the company. He has led one of the most radical overhauls in the entertainment industry: undoing centurylong business practices, putting new leadership in place, slashing many jobs and attempting to turn a vaunted studio into a content factory for the company's streaming service.

That has made him a divisive figure in Hollywood. To some, he is a futurist who recognizes that WarnerMedia must change if it is to survive and prosper in the streaming era. To others, he is a shortsighted interloper whose strategy is destroying the very essence of what made Warner Bros. Hollywood's most successful film and television studio for generations.

"I absolutely respect the history of Hollywood and media, but I don't feel obligated to cut and paste it going forward," he said. "In fact, I think that would be the complete wrong strategy."

Among the criticisms of Mr. Kilar are that he has he never run a company as big and far-flung as WarnerMedia, and that his move-fast-and-break-things approach -- common in the tech world -- has alienated many employees and creative partners.

Many are also concerned about the plethora of experienced executives who have left or been forced out since his arrival. Mr. Kilar relies primarily on a small inner circle composed mostly of former Hulu colleagues who lack creative backgrounds. Others noted that Mr. Kilar's endless enthusiasm can mask a reluctance to receive input.

"I absolutely did bring in a small number of people that I've worked with before that, where I felt like we had a gap in terms of capability, in terms of subject-matter expertise," Mr. Kilar said. However, he added, he has promoted a lot of people inside the company as well: "probably far more of those flavors compared to bringing someone from say Hulu or Amazon or elsewhere," he said.

Mr. Kilar is one of several new industry leaders attempting to redesign their companies for the 21st century. At Walt Disney Co., Bob Chapek has restructured television and film operations to focus on streaming shortly after succeeding Robert Iger as chief executive. Jeff Shell did the same at Comcast Corp.'s NBCUniversal after he took over from Steve Burke.

Mr. Kilar is facing perhaps the biggest challenge. While Messrs. Chapek and Shell rose through the ranks of their companies, Mr. Kilar is an outsider coming in after two years of continued restructuring that have left WarnerMedia veterans frazzled. Throw in a pandemic that shut down the whole entertainment industry, and it's safe to say Mr. Kilar has undergone baptism by fire.

"It's hard to imagine a more daunting set of circumstances to hand an executive," Mr. Shell said of Mr. Kilar. "I think he knows what it takes to make HBO Max successful and he's done a good job."

The streaming service is the cornerstone of AT&T's plan to attract and retain wireless customers by bundling HBO Max with their mobile offerings. The communications giant is eager to avoid a repeat of its previous, disastrous foray into media when it bought satellite broadcaster DirecTV.

Legacy entertainment companies' attempts to compete directly with Netflix have yielded mixed results. Disney+ has been an instant success, with over 100 million subscribers world-wide, versus more than 200 million world-wide for Netflix.

HBO Max, meanwhile, has had a slower start since it went live last May. The pandemic shut production down and limited the amount of fresh content available at launch. The combined number of HBO and HBO Max subscribers is 44 million in the U.S. In June, HBO Max is to launch in 39 countries world-wide, the company said.

Before the launch of Max, HBO had about 33 million subscribers and its growth was stagnating. In a promising sign for the new streaming service, most new sign-ups are for Max, not the premium-cable channel. "We're not seeing new HBO-only subscribers," said Andy Forssell, head of HBO Max.

After graduating from Harvard Business School in 1997, Mr. Kilar spent nearly a decade at Amazon, helping develop the company's video and DVD businesses and rising to senior vice president. Along the way, he also became close with CEO Jeff Bezos.

In 2007, he became the first CEO of Hulu, where he often clashed with the streaming service's media owners -- including Disney and 21st Century Fox over rights deals to content that he felt hindered Hulu's efforts to attract subscribers. Disney has since acquired Fox's entertainment assets, including its Hulu stake.

"He's a disciple of Jeff Bezos, and Bezos has certain mantras of business. Bezos is all about focusing on and understanding the customer above all else," said Kevin Mayer, a media entrepreneur and former senior Disney executive who was on the board of Hulu when Mr. Kilar was running it. "Invariably when you do that you will be disrupting whatever industry you're focused on."

Mr. Kilar inherited most of the hand he is playing from his predecessor, John Stankey, now AT&T's CEO. Mr. Stankey decided the HBO brand would be the best selling point for the new streaming service, which would also come with lots of new and classic content.

HBO Max appears to have struggled to attract subscribers because of its price, even though consumers are well aware of the offering, thanks to its affiliation with one of the most prestigious names in cable television. But existing contractual agreements with pay-TV distributors meant that HBO MAX had to cost the same as the HBO cable channel, $14.99 a month. That is far more than Disney+ or Peacock, the service launched last year by NBCUniversal, and even slightly more than Netflix's most popular offering, which costs $13.99.

Just a couple of months after HBO Max launched, Mr. Kilar ousted the streaming service's top brass and put a single person, Warner Bros. studio chief Ann Sarnoff, in charge of all content to be distributed on the company's many platforms, from HBO and HBO Max to movie theaters, cable channels TNT and TBS. Previously all were run as separate entities.

That and other consolidation efforts led WarnerMedia to lay off more than 2,000 employees.

In an effort late last year to make HBO Max more attractive -- and because most movie theaters were shut down at the time -- Mr. Kilar signed off on a plan to put the entire 2021 Warner Bros. movie slate on HBO Max at the same time as their theatrical release, a move that was known internally as "Project Popcorn."

The decision -- a first for a major movie studio -- was made without alerting filmmakers, and caused a lot of ill will. Directors including Christopher Nolan ("Tenet," "The Dark Knight") and Denis Villeneuve ("Dune") publicly bashed the HBO Max streaming strategy, and Creative Artists Agency President Richard Lovett sent Mr. Kilar a letter in which he called the move "the epitome of a self-interested corporate maneuver intended to benefit your company while wreaking havoc on the industry."

The move may have stunned Hollywood, but it didn't surprise people who know Mr. Kilar well. "He has strong views on what he wants to do and when he wants to do those things, he goes and pursues them," said Andy Jassy, who worked with Mr. Kilar at Amazon and is set to succeed Mr. Bezos as the e-commerce giant's CEO later this year.

To appease the talent, Warner Bros. had to cut new deals, which cost the studio more than $200 million, people familiar with the matter said. HBO Max also had to pay high license fees for the movies.

"Our intention was to always make sure people felt fairly compensated," said Ms. Sarnoff.

During the recent walk and talk on the Warner Bros. lot, Mr. Kilar acknowledged it might have been better to give the studio's creative partners a heads up, but said it was more important for him to control the decision and deal with any fallout as it arose.

The bet has paid off so far, Mr. Kilar said. HBO Max added close to 3 million subscribers in the first quarter of 2021, and "Mortal Kombat" and "Godzilla vs. Kong," two of the highest-profile movies that became available on HBO Max at the same time as they opened in theaters, have both delivered solid box office results, considering that theaters are only now starting to reopen and seating remains limited.

Despite the vitriol, Mr. Kilar said he anticipates no long-term negative effects from Project Popcorn; nor does he believe talent will shun Warner Bros.

"We haven't seen it," he said.

Even Mr. Lovett has changed his tune. In a statement he said CAA has had productive conversations with the studio and has found a path forward.

Warner Bros. has said that next year, some of its movies -- the big blockbusters -- will spend 45 days in theaters before coming to HBO Max. Other movies will debut on the streaming service and in theaters simultaneously. In recent years, studios have typically waited around 90 days after a movie's theatrical release before making them available for home viewing.

Under Mr. Kilar, Warner Bros. pivoted from producing TV shows and movies for every network and streamer in town (and profiting handsomely from it) to a focus on feeding its own platforms. The bet is that eventually the subscriber fees and advertising revenue from a soon-to-launch ad-supported version of HBO Max, coupled with an expected boost to AT&T's wireless business, will be more beneficial to the bottom line.

"The obstacles are enormous and he's got a really huge challenge, but I think he's up for it," entertainment mogul Jeffrey Katzenberg said of Mr. Kilar. The two have known each other for years and Mr. Kilar was on the board of DreamWorks Animation when Mr. Katzenberg was CEO. Mr. Katzenberg most recently founded the now-defunct short-form streaming service Quibi.

Mr. Kilar's affable and casual manner is a stark contrast from his predecessor, Mr. Stankey, a traditional, buttoned-up chief executive. And while Mr. Stankey is all business, Mr. Kilar is known for emailing employees at all hours, including weekends, with his musings on everything ranging from current events to WarnerMedia's role in the social-justice movement.

Last September, he sent a companywide memo expressing concern about the company's reputation and culture that rattled some cages.

"What does it mean to treat a person with dignity?" he wrote. "At a minimum, I believe it entails an acceptance of another person's identity. It also entails a responsibility to validate, to recognize, and to include." He added that he was prepared to cut ties with companies and employees that didn't meet his expectations.

Some appreciate his candor, while others say they often feel they are being lectured. In his first few weeks at the company -- which coincided with the killing of George Floyd, a Black man, by a white Minneapolis police officer -- Mr. Kilar held a virtual town-hall meeting and brought in several speakers including Robin DiAngelo, the author of "White Fragility" to speak to employees about race.

Mr. Kilar acknowledged his intentions could be seen as self-righteous -- but in his view, this is also part of his job. "In terms of the death of George Floyd, I thought it was very important to get out and share thinking on it with the whole team," he said.

Mr. Kilar is not just trying to latch onto a moment. A Pittsburgh native, he grew up with an adopted Black sister, a background that played a large part in shaping his views.

"We stuck out like a sore thumb. It taught me a lot about empathy...about the world we live and the world that we could live in," he said.

Mr. Kilar has been obsessed with movies and TV shows since he was a child. He devoured biographies of Walt Disney and histories of Hollywood. One of his first jobs out of college was as a strategic analyst at Disney and he even got a taste of moviemaking as a production assistant on the set of the 1994 movie "The River Wild," starring Meryl Streep and Kevin Bacon.

A concern among many WarnerMedia executives is whether AT&T has the stomach for the level of funding needed to keep generating fresh content for HBO Max over the next several years. They currently see a gap of more than $2 billion between what HBO Max has ordered and the production budget allocated by its parent in two years. Asked about the notion of a potential budget crunch, Mr. Kilar said: "Sounds juicy."

He said he isn't worried about a shortage of cash, and said HBO Max is actually two years ahead of schedule in terms of subscription targets. "If we're fortunate enough to keep that kind of pace, we'll be bringing in a lot more revenue to this company than anybody had ever planned," he said. In the first three months of the year, AT&T said subscription revenues grew 12.6% to $3.8 billion, a gain it attributed to HBO Max.

In an interview, Mr. Stankey, the AT&T CEO, waved off questions about his company's commitment to the entertainment business, which he argued the telecom has demonstrated repeatedly. "Every time a hard decision has been put in front of this management team it seems like we've made the hard decision and we've moved the ball forward," Mr. Stankey said.

AT&T began revamping WarnerMedia as soon as the acquisition closed, a process that has entailed some growing pains.

The heavy focus on all things HBO Max has left executives at other units such as the Turner networks feeling demoralized, people close to the company said.

Even inside Warner Bros. many executives now feel the studio is losing its identity and exists only to serve HBO Max.

Ms. Sarnoff disagreed, saying the studio is still a pillar that stands on its own, but called the combination with HBO Max "our superpower."

All that, combined with the isolation from the pandemic has hurt morale, many company executives said.

"Change is hard for a lot of people," Mr. Kilar acknowledged. "And my job as a leader is to provide context and rationale, and explanation behind the change."

Write to Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

May 14, 2021 12:16 ET (16:16 GMT)

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