- Jason Kilar's move to shake up WarnerMedia's movie release schedule has some insiders questioning if he has what it takes to turn around the entertainment giant without destroying it.
- While Hollywood has raged at the decision, insiders say the way he carried it out shows he's a polarizing leader who's insulated himself from critics and represents the worst of tech industry stereotypes.
- His management is being closely watched as WarnerMedia attempts a risky transition to a streaming model.
- Boosters see him as a visionary risk-taker who's looking out for the consumer, though.
- WarnerMedia declined to comment.
- Visit Business Insider's homepage for more stories.
Jason Kilar is eight months into his new job running WarnerMedia and he's already replicating a decade-old playbook from his days at Hulu — leading some insiders to wonder if he has what it takes to run a complex, $34-billion dollar business.
That playbook might best be described as burning down the house so that the consumer can get access to as much premium content for free. After all, West Coast tech titans have often used the content-wants-to-be free (or cheap) mantra to dismantle media's established business models.
Media giants Disney, Fox, and Comcast launched Hulu in 2007 to fend off competition not from Netflix, but from YouTube, with ad-supported, premium broadcast network shows and hundreds of movies.
Kilar wanted complete control and to give TV viewers something radically different from broadcast and cable networks bogged down with endless commercial interruptions and from expensive pay-TV bundles weighed down by sports fees.
With Hulu's owners concerned that Hulu would threaten their existing businesses, Kilar, an Amazon vet, wrote them a caustic letter in 2011, dubbed "the bad boy memo," railing about ad loads and the entire pay-TV ecosystem.
Read more: WarnerMedia's Jason Kilar provokes wrath of Hollywood and cinema owners with move to shift movies to streaming
"A number of you that are reading this might be thinking that we'd have to be crazy to think our small team can actually re-invent television and compete effectively against a landscape of distribution giants like cable companies, satellite companies, and huge online companies," wrote Kilar. "We are crazy. All entrepreneurs need to be."
By the beginning of 2013, he was out.
Hulu by then was a $1 billion business with five million subscribers. He went on to run a short-lived company called Vessel, which raised $134 million from the likes of Bezos Expeditions before being sold to Verizon and shut down.
Older, and though perhaps not much wiser about the sensitivities of corporate America, Kilar, 49, just lobbed another unexpected grenade — this time at the movie industry, when WarnerMedia announced it would shift its entire movie slate for 2021 to HBO Max.
Kilar's style rankled Hollywood
Business Insider talked to eight people close to the company who described Kilar as a tech bro who acts on his own and has threatened key relationships, risking turning WarnerMedia into another AOL-Time Warner.
When Kilar's predecessor John Stankey, now CEO of telecom giant AT&T, ran WarnerMedia, he was careful to pay his respects to the Tinseltown crowd, recognizing their importance.
Kilar, meanwhile, has taken a very different approach — leading some insiders to question if he, an outsider from the tech industry with its tense relationship with Hollywood, can turn around a battleship this size.
Insiders say Kilar would have been an amazing choice to run HBO Max alone, but other candidates with more operational experience may have been a better choice. CNN chief Jeff Zucker, for instance, had already run NBCUniversal as chief executive, and was rumored to be in consideration for the post.
Read more: Hollywood insiders are speculating that Disney's Bob Iger, Alan Horn, and others are headed for the exit
Kilar's Twitter followers were ecstatic about the move to release new movies online at the same time they debuted in cinemas, but it went down in Hollywood about as well as a surprise email from the hackers who took down Sony in 2014.
Kilar's devil-may-care, blow-it-up leadership style may be just what owner AT&T needs to push WarnerMedia's subscription video business into the big leagues. But it risks poisoning the water in the well where the company will drink for many years. And while $14.99-per-month HBO Max will certainly add subscribers as a result, the jury is out on how big of a piece of the value chain is disappearing for everyone else.
Kilar was said to have insulated himself from Hollywood
Important business partners such as the cinema industry, the talent agencies and the people who make movies and TV shows were livid, not just with the decision but the way the news was delivered. Unpalatable news in Hollywood might usually be floated by a trade to see what reaction it gets before being official.
Many people Business Insider talked to said Kilar has insulated himself, letting others, such as Warner Bros. Entertainment chief executive Ann Sarnoff, and Toby Emmerich, chairman of Warner Bros. Pictures Group, deal with the fall-out with upset partners.
Sources close to the company denied that characterization and said Kilar has had conversions with partners in the wake of the decision.
Read more: HBO Max's chief breaks down the seismic decision to stream all 2021 Warner Bros. movies as they hit theaters and responds to speculation about 2022 and beyond
CAA's Richard Lovett threatened legal action and slammed the blindside. Endeavor's Patrick Whitesell objected to the self-dealing while the Directors' Guild of America called the switcheroo "unacceptable."
The move laid bare a wider problem Hollywood sees with tech companies: They worship data, but share little of it.
"What's the difference between a sign-up, a registration, a member, an activation? They don't tell us at the end of the day. When you look at the commodity of these assets, they used to be curated by human beings. Now they think that can scale story-telling, that's a big problem," said one senior Hollywood executive who works with talent. "All that matters is the subscriber number and the stock price."
'Fanboy' Kilar cleaned house at WarnerMedia
At WarnerMedia itself, Kilar's tech roots have also been met with suspicion. Is he the change agent doing what old media needs to modernize, or just a product guy who doesn't care about the substance?
Kilar is no longer running a start-up side hustle for broadcast network owners but one of the oldest and most successful TV and film companies in history. AT&T-owned WarnerMedia took in some $33.5 billion in 2019.
It encompasses the giant TV, film and gaming operations of Warner Bros., but also news network CNN; tabloid news site TMZ, a major sports relationship with the NBA, via Turner, as well as HBO, and of course the most important asset of all — the streaming service HBO Max.
Activist firm Elliott Management forced a shake-up inside AT&T in 2019, demanding asset sales and new leadership, leading chief executive Randall Stevenson to step down. He was replaced by John Stankey, who named Kilar his successor.
The choice was a slap in the face to traditional TV folks and a sign that younger, technology executives, however inexperienced at running big companies, were in charge now.
To some, Kilar is an industry visionary like Steve Jobs — a risk-taker developing new ways to get content to consumers. To others, he's Steve Case, the guy who took an early bet on merging AOL and Time Warner and ended up creating an epic culture clash, resulting in what's widely considered the worst merger in corporate history.
"He's created a little celebrity mystique around him," said one person who has worked with him. "He doesn't consult with people. Senior management have been openly questioning his decisions. He tells everyone, 'This is what we're doing.'"
Kilar, who frequently dresses casually in black T-shirts, is described by several people who spoke to Business Insider as a "fanboy," which, according to the dictionary, is an overexcited male, or someone who is obsessed with comics, movies or music.
"He loves to talk about movies he's into," said one executive who has worked with him. Obsessive seems to describe him pretty well. This dad of four is such a huge fan of the North Carolina Tar Heels, that, according to a story on his former university's alumni page, Kilar briefly left his pregnant wife in Hawaii on vacation to watch a football game with his pals in Detroit.
One person who has worked closely with him describes Kilar as a character from HBO's "Silicon Valley," a satirical series about West Coast tech culture. Others say Kilar still insists on describing the "internet as a gift," as if the internet isn't now as commonplace as electricity.
The Pittsburgh native, who studied journalism and business administration at the University of North Carolina and got an MBA from Harvard Business School, borrows his communication style from other unconventional CEOs such as T-Mobile's former chief John Legere, favoring Twitter over press releases.
In the past few weeks, Kilar has been sharing photos from the Warner lot to the holiday decorations at AT&T's headquarters to CNN and decrying the lack of a Twitter edit button after making a spelling mistake.
Almost immediately after he became CEO, Kilar's leadership ranks thinned, including top executives, Bob Greenblatt and Kevin Reilly. Kilar brought in his own management version of the movie "Ocean's 11," about close friends who plan a casino heist. He re-hired former Hulu execs Rich Tom and Andy Forssell.
He also raised eyebrows in the Hollywood powerful PR world by naming Christy Haubeggger, the company's chief enterprise inclusion officer, to the top global marketing and communications slot. Ironically, Haubegger came from talent agency CAA, which had the most to say about being shut out of the 2021 movie release news until the last minute.
Layoffs and lockdown haven't helped Kilar
It hasn't helped Kilar's popularity that Warner is laying off thousands as it attempts to streamline its siloed businesses.
And with the pandemic, staff have seen little of him in person beyond the Town Halls about racism following Black Lives Matter protests and restructuring and what he shares to his 16,500 followers on Twitter.
Pink-slipped staff have taken to sharing Kilar's executive compensation details. He receives a base salary of $2.5 million with an annual bonus of the same amount and will see a quarter of his $48 million of restricted stock units vest every February 15 starting next year, according to an SEC filing.
Warner Bros., the force behind classics like "Gone with the Wind" and "Harry Potter" and television greats such as "The West Wing" and "Friends," is the unit feeling the biggest pinch when it comes to lay-offs.
"The Warner Bros. ecosystem was built over 97 years and TV has been such a dominant force, they just assume everything will be the same. It just doesn't work that way," said one staffer, adding that the morale has been hurt and employees are craving strong leadership.
"It's as if Time Warner bought an aerospace company and then fired all the aerospace people," said one former employee who is aghast at what he views as the destruction. "AT&T and WarnerMedia — it's going to end up the same as AOL, Time Warner. This is history revisited; it's been mismanaged as badly."
Kilar for his part has suggested that talent should look forward to a day when movie budgets are $1 billion and viewer numbers are six hundred million-plus.
To be sure, Kilar isn't responsible for all of WarnerMedia's challenges. He inherited some big-budget projects which some people on the outside view as mistakes.
According to two sources, the cost of Zach Snyder's "Justice League" mini-series ballooned way beyond the estimated $30 million budget, while those who enabled it are now departed. A knowledgeable source says the project is on budget.
Kilar has other headaches
Warner's relationship with Hollywood isn't the only challenge for Kilar. A question mark also hangs over the direction of CNN, where its chief executive Jeff Zucker is widely said to be making plans to exit, leaving no obvious successor.
Despite Kilar's telling tech journalist Kara Swisher he'd like Zucker to stay another 50 years, relations with Zucker are not close. (Zucker was one of Kilar's TV bosses while at Hulu whom he lectured on the future of the TV model.) "It's not a secret they don't see eye to eye," said one former executive who is familiar with the situation. Zucker and Kilar grabbed Starbucks together at a Dallas board meeting in recent weeks, though, according to a person familiar with the event.
Two people with knowledge of conversations told Business Insider that Kilar did not check in with Zucker or give him a heads-up before centralizing CNN's financial, HR and communications functions. Zucker had also been floated as a candidate for the chief executive role at WarnerMedia.
A CNN spokeswoman declined to comment.
Turner's traditional channels are being starved of investment and run for cash, according to several former executives who spoke to Business Insider — a situation not likely to endear the company to the NBA, which sold its TV rights to Turner; or advertisers who are still trying to capture mass audiences through traditional TV.
An AT&T spokesman did not immediately respond for comment.
WarnerMedia's future is without a doubt about HBO Max
HBO Max has 12.6 million subscribers through September 30, and is expected to have added many more since its agreement with Amazon and the addition of the new movie line-up. The company also signed distribution deals with Roku, PS5, Comcast Xfinity X1 and Flex, which will help HBO Max win more sign-ups.
Amazon will add HBO Max to its Fire TV devices while removing HBO from its channels line-up, a move that will help drive Max subscriptions.
Whether AT&T can ultimately succeed at making streaming a profitable business is the question. WarnerMedia saw third-quarter revenue drop from $8.4 billion in the year-ago period to $7.4 billion, in part a result of COVID-related impairments.
Warner argues that its movie-release initiative benefits theaters by keeping product rolling out on a regular basis while other studios have delayed releases. It also helps the company construct a marketing plan to boost viewership of its movies.
The simultaneous release plan could cost the company $1.2 billion in lost revenue, according to independent equity analysts MoffettNathanson. HBO Max would need to add 8.4 million additional subscribers annually to remain revenue neutral.
But as in Silicon Valley, there is less emphasis, and perhaps for the moment less of a need, to show profits, as Wall Street cares more about predictable increases in subscriber numbers than lumpy theatrical returns.
A former Twentieth Century Fox executive, David Smyth, now a media consultant in the UK, said: "The entire industry is changing from being one where content is produced and monetized through windows to one where content is produced to acquire or retain customers in a direct-to-consumer environment. It's a hugely difficult transition to make."
What remains to be seen is whether Kilar can build a streaming video mouse trap that is just as attractive to the consumer as Netflix, which has 195 million subscribers and forecast it would add six million subscribers in the fourth quarter alone.
It's a challenge Kilar himself would seem to appreciate.
"Consumer behavior is one of the hardest things to change," he told Fast Company in 2009. "The gap between the existing and the new has to be so materially better that it shocks you into a behavior change."
Disclosure: Mathias Döpfner, CEO of Business Insider’s parent company, Axel Springer, is a Netflix board member.
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