WarnerMedia Under Pressure To Deliver Strategy By Activist Investor

The Wall Stree Journal reports WarnerMedia is under pressure to deliver by activist investor Elliott Management Corp.

When AT&T agreed to buy Time Warner three years ago, the company assured Wall Street and regulators that the purchase would help it enter the streaming wars and become an advertising juggernaut that could compete with Alphabet Inc.’s Goole and Netflix Inc. However, activist investor Elliott Management Corp. released a letter to AT&T on Monday saying that company has “failed to articulate a clear strategic rationale” for the $80 billion+ purchase of Time Warner.

A portion of Elliott Management Corp.’s letter to At&T on WarnerMedia reads as follows:

“While it is too soon to tell whether AT&T can creat value with Time WArner, we remain cautious on the benefits of this combination.”

Elliott Management Corp.’s letter also states that “there is a growing sense that AT&T doesn’t have a plan” regarding direct-to-consumer streaming and that the company is without the media expertise it requires following the departure of top Time Warner executives. As the Wall Street Journal notes, Elliott Management Corp. urged AT&T to focus is efforts on execution as opposed to acquisitions and relieve itself of “noncore assets across its business.”

AT&T initially planned to enter the streaming service wars with a three-tiered platform, where the entry-level option would focus on films while additional tiers would provide premium HBO Now and Warner Bros. programming. However, the strategy shifted to a single streaming service called “HBO Max” and Elliott Management Corp. said the sudden change in plans lends to their apprehension:

“This quick reversal has intensified the skepticism around WarnerMedia, its OTT strategy, and the management of the business itself.”

WarnerMedia executives argued it was unfair of Elliott to claim that there is “confusion” and a “lack of a plan,” noting that the long antitrust battle with the United States Justice Department that concluded in February hindered AT&T ability to integrate Time Warner. The WarnerMedia executives added that AT&T plans to outline its strategy at an investor meeting at the end of October. However, it appears the exits of top executives in WarnerMedia’s HBO and Turner divisions concerns Elliott, as the company also wrote:

“For a content business now owned by a telecommunations company and under the direct supervision of a lifelong telecom executive, this lack of continuity in leadership presents a real concern for investors.”

Stay tuned to Heroic Hollywood for the latest news on the future of WarnerMedia.

Source: Wall Street Journal