AT&T’s John Stankey Talks WarnerMedia Plans, Netflix Spending, DC Movies and CNN Politics

The 30-year AT&T veteran says he realizes there may be culture clashes between the buttoned-down, Texas-based company and the more freewheeling creative businesses he now oversees, but he views his job not to meld cultures but to let each unit operate independently.

This week begins the AT&T era in Hollywood, with the telecom giant officially taking control of Time Warner and its collection of media assets including HBO, Warner Bros., CNN and the Turner networks. Managing those divisions, now dubbed WarnerMedia, is John Stankey, a 30-year AT&T veteran with a deep voice and no-frills demeanor. Stankey, 55, says he realizes there may be culture clashes between the buttoned-down, Texas-based AT&T and the more freewheeling creative businesses he now oversees, but he views his job not to meld cultures but to let each unit operate independently. He spoke to The Hollywood Reporter about his immediate plans, the #MeToo movement and how to take on Netflix, from New York, where he is preparing for a week of town halls and introductions there and in Atlanta and Los Angeles.

This is an edited transcript:

Let's start with HBO. I think people there are salivating about the possibility of getting to finally compete on the spending front with Netflix. You’ve said investment in content is going to be ramped up, but can you give us any parameters, like, will you say, “You spent $2.5 billion last year, you've got $4 billion this year”?

I'm not going to talk about any specific budget levels. But we've had some discussions prior to close [of the acquisition]. The folks at HBO have a strong funnel and they have good product and the opportunity to move into development with very short notice. This is not a long ramp. We are very interested in continuing to accelerate investment in that IP that we can ultimately control and own. And I don't believe our strategy should be characterized as a “me too” on Netflix. Our goal is to build a product that meets different needs over time, and there's room in the market for a variety of different approaches. And you should expect that there obviously will be more content involved with it. I don't think our goal here is to strictly just outspend Netflix without regard to the segments we're serving, the product we're making, and where we want the product to go over time.

Do you think Netflix spends too much on content?

If they have a business model that works for them. We're a different company. We're a company that has revenue sources from a variety of different places. Relatively speaking, the media business is not our dominant business. Our dominant business is connectivity and subscription services. So we think about how we take the media business and have it be complementary to our connectivity businesses, which Netflix doesn't deal with. As you know, they free-ride on connectivity over everybody.

I don't know that they would describe it that way.

OK, well, they use other people's broadband, how's that?

Yes. You’re about to start a road show to meet with different divisions. There is a lot of concern within these different companies about culture clash with a new owner. What do you expect to do to meld these very different cultures?

I don't think the goal is to meld. The goal is to insure that we maintain what's right and good about the former Time Warner companies, now WarnerMedia. It's natural, people are going to sit on the sideline right now with somebody like myself and my background coming in and question whether or not I'll respect that or whether I will run the right plays. I think time will tell and data points will support, as I go through and make decisions and as we run this business moving forward, whether or not I do the right thing. My goal is not to change the culture.

My goal is to bring what I can to help it be more effective. And what I bring is opportunities to think about distribution differently and how do we use technology to more broadly distribute content. And how do we use it in a way that we can innovate on models for user interfaces and advertising targeting. And my hope is that I can seed a great creative culture with some energy and focus in those areas without losing the wonderful and strong creative culture that already exists.

You mentioned there may be some duplication and layoffs at the upper level of the company. What does that mean?

I want to be fully transparent and clear, that's kind of how I choose to operate and work with folks. I don't think it's startling to anybody that the Time Warner corporate entity has a high degree of overlap and duplication with the AT&T corporate entity. We don't need two treasury departments that are going to be issuing debt in the market, we don't need two tax departments. We don't need two sets of securities lawyers. And those are the kind of things where I think you're going to see displacement. There is no duplication within core AT&T for people who work at Warner Bros. or HBO or Turner, and their mission is largely unchanged today from where it was a week ago. It doesn't mean we're not going to reorient capital allocation. We just talked a little bit about that with HBO. But it means that people are going to be focusing on doing the work to innovate. We're not restructuring operating entities in the divisions.

So there's not an effort to look at these businesses and figure out how you can do the same with a leaner force?

There are no plans for any major changes in the workforce right now. But look, these businesses are all changing, the industries are changing. There isn't an industry on the face of the planet right now that isn't subjected to major dynamics and disruption and innovation and change. And to say that those kind of effects aren't going to ultimately impact these companies over time in terms of how investment is made and where skills in the workforce rest and reside — look, I'll never sit here and tell you that that isn't at some point in time going to be an impact on a large business.

At Warner Bros. there have been some creative challenges on the DC Comics films. I know you said you're not going to get into creative, but this is a strategic, gigantic play for that company and compared to what Marvel is doing for Disney, it seems like this would be something that you’d get involved in.

First of all, I think the performance [of DC movies] over the past year and a half is trending the right direction in terms of the quality of the product and how the franchise is being managed. So hats off to Kevin [Tsujihara] and the team around getting the momentum headed the right direction. Obviously, there were some public things that have occurred over the last couple of weeks [Diane Nelson and Geoff Johns, who ran DC Entertainment, both stepped down] that would indicate that some additional change is underway. My involvement in that is to make sure I support Kevin in getting the absolute best talent possible and we'll take that franchise to the next level. That's his set of decisions to make and his direction to go in.

It's my job to facilitate, to make sure he has the full support of the corporation and getting that done. And I believe, as you sit here today and we start to think about what the new value proposition is for a combined Warner Media and AT&T, we obviously want to go to creatives and talk about what we can do with our platforms now that are different than what a stand-alone Time Warner could do prior to the transaction. That’s a unique opportunity, and I want to make sure I can help Kevin sell that and get the right amount of talent in here to elevate the franchise to a new level.

Steve Burke, your counterpart at Comcast, instituted what they call Symphony, so certain projects throughout the company get the full weight of Comcast behind them. Do you anticipate something similar with AT&T?

Yeah, but we're going to call it "Orchestra." (Laughs.)

Funny.

Sure, absolutely. What we intend to do around advertising and innovation in the advertising space…it's ripe for change. We can't continue to run ad-supported content the way we do today. There is a better way to do it, it can be more targeted, it can be less intrusive, it can be more relevant. And the only way you do that is with a combination of the great data that we have and our end-user customer relationships at AT&T with the technology and the platforms that we have to be able to insert and bring targeted ads in place and marry that to the inventory that's owned by Time Warner — specifically Turner in this case — and figure out how we innovate in that area.

President Donald Trump has gone after Amazon and CEO Jeff Bezos, and most people believe it's because of the coverage from Bezos’ Washington Post. Are you prepared for those phone calls from both your peers and from very powerful people when they don't like something that's on CNN?

AT&T, even prior to this transaction, was a fairly complicated business. We weren't immune to that dynamic. Now, does having a media company impact that? Sure. It probably brings it to another level or it may be more frequent. We intend to support CNN, we intend to maintain its editorial independence. I know that that's going to mean that there will be some tough decisions that occur as a result of that and you will see us be very rigorous around how we do that. I think we 're ready for that.

Even if your name shows up in a Trump tweet?

Even if my name shows up in a Trump tweet. If he's doing his market research, he wouldn't be using my name because his constituents probably don’t care about it.

There has been an upheaval in the entertainment business over the past year related to the #MeToo movement. Warner Bros. cut ties with Brett Ratner after allegations surfaced, HBO dropped Mark Halperin and Louis C.K., and CNN chose to keep one of its contributors, Ryan Lizza, when The New Yorker let him go over unspecified claims. What’s your response to those who might be concerned that this company is coming in from Texas and may not have those same concerns over ending a lot of this behavior in Hollywood?

Wow. That's the last place I would have expected you to go.

Well, these issues come up every single day.

I put forward to you to look at AT&T's track record on this issue. Look at our track record on diversity and inclusion. If you don't think that this management team understands how to build an inclusive workforce that treats people fairly and respects individuals for their chosen lifestyle, I just don't think there is data to support that. Time Warner as a company has done a good job of managing this as well, but we have an opportunity to make sure that we carry that dynamic forward in how we build our relationships and make this a preferred place to come and work and bring your creative talents, because we understand this. I think we have been out in front of the industry for a long period of time on this issue and I intend to demonstrate that we have the kind of moral background and ethical approach to running our businesses that people would expect.

Only one of your 11 direct reports is a woman.

Would I like a few more women reporting to me over time? Yeah. I'm working through that. To some degree, I've got to deal with the dynamics of people that I have within roles that have established themselves. Sometimes it takes a little bit of time to get those things done. But I think if you look at the dynamics of the background of individuals and representation of ethnicity, et cetera, I think we have a really good start at it within my leadership team.

There are a lot of questions about Peter Chernin, who is a prominent executive and has a video business with AT&T. Do you anticipate working with him?

I have a great working relationship with him, I have a lot of respect for Peter and I would expect we'll continue to find opportunities where our interests intersect moving forward.

How does AT&T plan to leverage these assets to grow internationally, especially with regard to distribution?

Over the long haul — again, looking out five or 10 years — these businesses are going to have to have not just a domestic footprint but an international footprint. This is going to be a continent-by-continent game, and some businesses are going to be advantaged on one continent versus another. And it's going to take some time to ultimately build these global footprints, but it's imperative that it happen in order to maintain the appropriate scale and marginal cost structure in developing premium content.

If Fox sells to Comcast, do you anticipate needing to bulk up even further?

We’re a very sizeable company, and one of the things that differentiates us from some of the other current media consolidation is we've got a wireless business, which is a scaled business and it's consistent with how people are going to be consuming content as we move forward in the future and as 5G networks evolve.

In your last interview with The Hollywood Reporter in August, you admitted one of your favorite shows is Downton Abbey. Do you care to update that list?

In the Stankey household, we have to have that which John watches on his own and that which John watches with Mrs. Stankey. Downton Abbey was that which John watches with Mrs. Stankey. (Laughs.)

What do you watch when it's just John time?

Right now, Westworld is definitely the top of my list. It's one of my single appointment-viewing experiences right now.