T AT&T Inc

By Drew FitzGerald, Joe Flint and Benjamin Mullin 

AT&T Inc.'s WarnerMedia is preparing a restructuring that seeks to reduce costs by as much as 20% as the coronavirus pandemic drains income from movie tickets, cable subscriptions and TV 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.

Rivals including Walt Disney Co. and Comcast Corp.'s NBCUniversal have also cut jobs in recent months as the film and TV business struggles.

"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."

This is the second wave of substantial cuts at the company, after WarnerMedia eliminated more than 500 jobs at Warner Bros. in August.

The current size of WarnerMedia's workforce couldn't be learned. Its predecessor company employed about 26,000 people before AT&T acquired the business in 2018. The telecom and media giant's overall workforce has steadily declined over the past two years through layoffs and attrition. AT&T employed 243,000 people at the end of June.

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 streaming app about a month after its launch, lagging 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 earlier 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 the 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 the film flopped. The disappointment led the studio to push "Wonder Woman 1984" from an October open to the end of this year. "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 from 2021 to 2022.

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," Mr. Stankey 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% so far this year, lagging behind rivals like Comcast and missing out on the stock market's record run.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com, Joe Flint at joe.flint@wsj.com and Benjamin Mullin at Benjamin.Mullin@wsj.com

(END) Dow Jones Newswires

October 08, 2020 17:48 ET (21:48 GMT)

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