| When asked about growing competition from streaming services Netflix and Amazon, former HBO chief Richard Plepler used to trot out a quote of uncertain provenance: The main thing is to keep the main thing the main thing.
Plepler never wanted HBO to deviate from making high-end scripted series, and chase eyeballs with something like Netfilx's "Tiger King." But that strategy didn't work for AT&T, which acquired Time Warner for $85 billion in 2018. AT&T said it wanted to use an online video service to boost its phone business — a questionable proposition — and combined the resources of HBO, Warner Bros. and Turner Broadcasting into HBO Max. (Plepler didn't like it, and booked a one-way trip to the Hamptons.) But now AT&T is looking to merge WarnerMedia with Discovery, as my colleague Ed Hammond reported Sunday. While the exact contours of the Discovery deal are still a bit murky, we know AT&T is rethinking its acquisition of Time Warner after less than three years. The entertainment business right now is a contest for scale in streaming. Netflix is the biggest player, and Disney is second. The gaggle of companies competing for third includes a couple of telecommunications companies (AT&T and Comcast), a couple of technopolists (Amazon and Apple), as well as ViacomCBS Inc. and Discovery, the only pure media companies of the bunch. AT&T chief John Stankey said he believes HBO Max can be one of the three or four services most people pay for on a monthly basis. Executives at WarnerMedia are more optimistic than ever given the recent boost from original movies like "Godzilla vs. Kong." But competition is expensive. Netflix is going to spend $17 billion this year on programming, and Disney isn't far behind. Winning is a matter of existential importance for those two companies, which derive all of their value from their entertainment operations. AT&T is still a phone company. Streaming is not and never will be its main thing. Several senior executives at WarnerMedia have remarked over the past year about how little AT&T's investors and analysts seem to care about HBO Max, or the economics of streaming. AT&T must worry about paying a dividend, and regaining market share in mobile. It's now looking up at both Verizon and Sprint/T-Mobile. Spending billions of dollars on HBO Max is a distraction from those efforts. Combining HBO Max with Discovery, meanwhile, can help both streaming service competes in areas where they don't have much experience. Discovery specializes in unscripted programming like Guy Fieri's "Diners, Drive-Ins and Dives" and "90-Day Fiancé," shows that are popular with a subset HBO never tried to reach. Unscripted programming has proven to be a valuable asset for Netflix over the past year and a half. Shows like "The Circle" and "Too Hot Too Handle" ranked among its most popular series during lockdown. They also travel internationally, as Netlfix is making country-specific versions of many of its reality shows. And Discovery, which is far too small to compete with any of the larger streaming services, can now combine with one of the strongest media libraries in the world. While this deal makes strategic sense, it comes with an obvious drawback: yet another restructuring. Even by the standards of a Hollywood script, the company formerly known as Time Warner has had an eventful couple of years. It announced plans to sell to AT&T, only to watch as the U.S. government sued to block the deal. The lawsuit left the company in limbo for more than a year. By the time the deal finally got approved and integration began, Plepler had announced plans to leave and AT&T said it would restructure Time Warner as WarnerMedia under three leaders: Bob Greenblatt, Kevin Tsujihara and Jeff Zucker. Then Tsujihara resigned due to an affair with an actress (and allegedly trying to get her roles), and AT&T fired Greenblatt after the underwhelming launch of HBO Max. It hired Kilar to run the whole shebang, and restructure it (again). KIlar has been in the job for a year, and now another reorganization is imminent. Discovery chief David Zaslav would like to run the whole thing. Plepler, meanwhile, is off making shows for Apple. Nowadays, the only companies that can afford to light money on fire in Hollywood are those whose valuations between with a T – as in trillion. Hollywood remains a total sideshow for Apple (and Amazon), but side shows are fine when your main businesses make more money in a quarter than Netflix makes in a year. — Lucas Shaw The best of Screentime (and other stuff) | 
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