AT&T Inc. Started Reorganizing Its WarnerMedia Unit, An Overhaul That Is Expected To Lead To Cost-Cutting And Layoffs

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AT&T Inc. started reorganizing its WarnerMedia unit Monday by combining its disparate networks and entertainment businesses, an overhaul that is expected to lead to cost-cutting and layoffs.

The company said it hired former NBC Entertainment Chairman Robert Greenblatt to be chairman of a newly created unit called WarnerEntertainment—which combines HBO and Turner’s entertainment operations—and Direct-to-Consumer, which includes the streaming service WarnerMedia plans on launching later this year.

Other parts of Turner are being lopped off and merged with different units as part of the overhaul. Turner’s sports division will be overseen by CNN chief Jeff Zucker, who now becomes chairman of WarnerMedia News and Sports, and president of CNN.

Warner Bros. Chairman and Chief Executive Kevin Tsujihara will add oversight of Turner’s animation operations, which include the Cartoon Network and Adult Swim as well as their merchandise and licensing units.

By combining Turner’s animation with Warner Bros.’ DC Entertainment, AT&T is looking to create a new global children programming and videogame behemoth. Turner Classic Movies will also be housed at Warner Bros. under Mr. Tsujihara. Gerhard Zeiler, president of Turner’s international operations, will become chief revenue officer in charge of distribution and advertising for the cable networks group.

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Messrs. Zucker, Tsujihara and Zeiler are among the current WarnerMedia executives whose portfolios—and profiles—are set to significantly grow as a result of the reorganization. All will report directly to WarnerMedia Chief Executive John Stankey, as will Mr. Greenblatt.

In a statement, Mr. Stankey noted that Messrs. Greenblatt, Zucker, Tsujihara and Zeiler “collectively have more than 80 years of global media experience and success.”

The consolidation of several units within WarnerMedia is expected to lead to significant staff reductions, people familiar with the matter said. Cutting costs and streamlining operations is crucial for AT&T, which is currently saddled with about $170 billion in net debt, the most of any nonfinancial U.S. company. After AT&T announced its plans to acquire Time Warner in 2016, it projected $1.5 billion in annual cost savings and another $1 billion in “revenue synergies.”

The knife is likely to fall hardest on operations at Turner, which accounted for roughly as much operating income at Time Warner as HBO and Warner Bros combined. The consolidation could force more jobs to relocate from Turner’s longtime base in Atlanta, where AT&T had already been closing offices in its own telecom division before the merger, choosing to focus on its Dallas headquarters as well as growing its growing presence in New York and Los Angeles.

The moves are AT&T’s first significant steps since it closed on its $80 billion-plus acquisition of Time Warner last June. Last week, in anticipation of the changes, HBO Chairman and Chief Executive Richard Plepler and Turner President David Levy announced their resignations.

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