With a new owner, the 99-year-old movie studio appears headed back to its traditional sweet spot as an entertainment company. But the business of Hollywood is no longer the same.
LOS ANGELES — By 2018, almost every golden-age Hollywood studio had been conquered by outside forces.
Metro-Goldwyn-Mayer had been tossed between disruptive owners for decades, never to fully recover. Columbia Pictures was sold to Coca-Cola in 1982 and then offloaded to Sony in 1989. Universal had weathered five outside takeovers in the span of 21 years. Paramount Pictures had been strip mined for cash by an ailing Sumner Redstone.
Warner Bros. alone stood as Hollywood’s citadel, a beige-walled protectorate of filmmakers run by executives with institutional Hollywood knowledge.
Then AT&T drove into town.
The Texas phone giant took over Warner Bros. in June 2018 as part of a bid to “bring a fresh approach to how the media and entertainment company works,” as Randall L. Stephenson, then AT&T’s chief executive, put it at the time. As it set about building a Netflix-style streaming service, AT&T slashed and burned through the Warner Bros. ranks and installed leaders with little Hollywood experience. They cut costs, surprised stars with abrupt distribution decisions and pushed Warner to start behaving as more of a technology company and less of an entertainment one: It’s the future!
“The telephone people had no understanding of Hollywood — and no passion for movies,” Robert A. Daly, who ran Warner Bros. in the 1980s and ’90s, said on Friday. “It’s the same mistake outsiders always make. It’s show business, show business, show business. They always forget that.”
On Friday, AT&T handed off Warner Bros. to Discovery Inc. as part of a $43 billion merger.
The 99-year-old movie studio, home to Harry Potter, Batman and Bugs Bunny, will now head in a different direction — back toward its traditional sweet spot as an entertainment company, or at least Hollywood’s newest mogul has vowed. David Zaslav, Discovery’s chief executive, will run the new corporation, which is called, with no small amount of symbolism, Warner Bros. Discovery.
Already, Mr. Zaslav has vanquished tech leaders brought in by AT&T, including Jason Kilar, who made his name at Hulu and Amazon, and Andy Forssell, who came up through Oracle and Hulu. Also departing is Ann Sarnoff, who AT&T hired to run Warner Bros. in 2019 despite limited Hollywood experience. During her tenure, Ms. Sarnoff reworked the Warner Bros. shield logo, dropping the gold trim in favor of AT&T blue. On Friday, Mr. Zaslav restored the gold.
Some Hollywood players never changed their acid position on Ms. Sarnoff — she’s not one of us — with film folk sniping about her delay in relocating to Los Angeles from New York. (With the pandemic ebbing, she bought Matt Damon’s old house in November, spending roughly $18 million.)
In contrast, Mr. Zaslav is already deep into a lavish restoration of Woodland, an estate in Beverly Hills where Robert Evans, the show business legend, lived for decades. Mr. Evans was known for orchestrating a creative rebirth at Paramount in the 1960s and ’70s, delivering era-defining triumphs like “The Godfather” and “Chinatown.”
“Success is about creative talent, in front of the screen, and behind the screen, and fighting and fighting to create a culture that supports that creative vision,” Mr. Zaslav said when announcing the takeover. For much of the past year, he has rhapsodized about the studio’s rich legacy, repeatedly paying tribute to Jack, Harry, Sam and Albert Warner, “the brothers who started it all.”
On Friday, Mr. Zaslav talked about his aspirations to “dream big and dream bold” in an email sent to his new employees. “Hallelujah,” one Warner Bros. manager said in a text message afterward. Another executive at the studio, speaking by phone, said she was going on a “wild” shopping spree to celebrate, adding, “Hollywood is back, baby.”
Others were not so sure. Mr. Zaslav qualifies as an entertainment insider, having run Discovery, a cable television behemoth, for 15 years and working at NBCUniversal before that. But he has little film experience. The merger also comes with breathtaking debt — some $55 billion — that will have to be paid down, even as content costs rise. Mr. Zaslav will need to make difficult decisions about how to allocate resources. How much money should be spent on movie production and marketing? To what degree should the studio make movies for exclusive release in theaters? Should the focus shift even further toward supplying films to HBO Max, the company’s streaming service?
Under Ms. Sarnoff, Warner Bros. slashed its annual theatrical output by nearly half and built a direct-to-streaming assembly line. “The good old days are gone forever,” one Warner-affiliated film producer said on Friday.
Hollywood as a whole finds itself in a similar state of mind: optimistic about the future of movies one minute, pessimistic the next. There is evidence that theaters are finally bouncing back from the pandemic. Over the weekend, the PG-rated “Sonic the Hedgehog 2” took in a huge $71 million in North America, the biggest opening total for a Paramount movie since 2014, while “The Batman” (Warner Bros.) added $6.5 million in ticket sales, for a blockbuster domestic total of $359 million since arriving on March 4.
At the same time, one of Hollywood’s most bankable directors, Michael Bay, sputtered over the weekend. His crime thriller “Ambulance” (Universal) arrived to just $8.7 million in ticket sales. In another bummer, “Morbius” (Sony) collapsed in its second weekend, collecting $10.2 million in the United States and Canada, a 74 percent decline.
Some analysts liken the future of big screens to Broadway — still alive, but relegated to a corner of the culture. “The pandemic caused a phase shift in movie consumption patterns with audiences having moved decisively to preferring streaming services over the theatrical experience for all but the biggest, loudest, PG-13est films,” Doug Creutz, a Cowen analyst, wrote in a March 25 report.
The result is a disoriented movie business. Run toward streaming. No, wait — we’ve got to keep theaters alive. Run the other way.
Now, run both ways at the same time.
The discombobulation at Warner Bros. started in 2016. That is when AT&T announced that it was buying the studio’s parent company, Time Warner, for more than $85 billion. The deal sat in regulatory limbo for 20 excruciating months, limiting the ability of Warner executives to make bold strategic moves. Moreover, Netflix was spending billions during that period to become the preferred home for film directors and marquee television producers. Amazon Prime Video was also making inroads.
Mr. Zaslav’s catch-up strategy will soon emerge. To formulate it, he has spent months reaching out to people like Mr. Daly; Sherry Lansing, the retired Paramount superpower; Robert A. Iger, who retired as Disney’s executive chairman in December; and Alan F. Horn, who ran the Warner Bros. Pictures Group from 1999 to 2011 and then led Walt Disney Studios for nearly a decade.
Their brain power was undoubtedly invaluable. But meeting with them also sent a clear message to Hollywood: I respect your culture.
“For an industry of its substantial size, Hollywood is surprising insular,” Mr. Horn said on Saturday. “The creative community, in particular, needs to feel your respect. Artists need to know that you understand them and will do your absolute best to protect them.”
Mr. Horn continued: “David’s willingness to go around town and seek the advice of dozens of people has spoken volumes. It’s how you build trust.”
Mr. Zaslav will “work with a passion to rebuild the studio’s relationship with the creative community,” Mr. Daly said. “You’ve got to support the talent,” he added. “It’s a bit like children: Don’t spoil them too much, but make them feel loved.”
Mr. Daly then waxed nostalgic about talent relations at Warner Bros. in the past. The studio used to send turkeys to stars at Thanksgiving. “It cost nothing, and it meant the world to them,” he said. There was also the time, in 1992, when Mr. Daly gave free Land Rovers to seven members of the “Lethal Weapon 3” cast and crew. “It cost us $320,000 to buy those Land Rovers, and we were criticized left and right for the expense,” Mr. Daly said. “Do you know what it got us? ‘Lethal Weapon 4,’ which made $285 million.”
Mr. Zaslav seems to have taken notes. In February, when Los Angeles hosted the Super Bowl, stars like Charlize Theron and Jamie Foxx and prolific Warner Bros. producers like Greg Berlanti (“Riverdale,” “The Flight Attendant,” “You”) were invited to party in his suite at the new SoFi Stadium. Mr. Zaslav and his key lieutenants bought the suite with the intention of routinely wining and dining talent at football games, concerts and other major events.
The stately Warner Bros. complex in Burbank, Calif., is the ancestral home of Humphrey Bogart (“Casablanca”) and Bette Davis (“Now, Voyager”). Mr. Zaslav intends to move into Jack Warner’s old office, a decision based on his stated desire to be near where “the magic happens.” The Warner Bros. administration building is near Soundstage 6, where one of Mr. Zaslav’s favorite movies, “The Maltese Falcon,” was partly filmed.
Just one word to the wise, Mr. Zaslav: Don’t park in Clint Eastwood’s spot. He’s had it for more than 50 years and once used a baseball bat to knock out the windows of an interloping car.
John Koblin contributed reporting from New York.
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