Feb 8, 2022 - Economy

Scandal plagues CNN parent WarnerMedia ahead of Discovery deal

Photo by Bill O'Leary/The Washington Post via Getty Images

Recent conflicts at CNN are causing uncertainty and anxiety ahead of the completion of the $43 billion deal to combine parent company WarnerMedia with Discovery.

Why it matters: The decision to spin-off WarnerMedia by AT&T was done primarily to pay down debt. Now, AT&T will be able to offload several messy business headaches as well.

Driving the news: In the days since CNN boss Jeff Zucker's sudden resignation, leaders at WarnerMedia and WarnerMedia's parent company AT&T have offered different takes on what happened, leading to confusion and frustration among employees.

  • WarnerMedia CEO Jason Kilar told CNN's Washington bureau staffers that the decision to ask Zucker to resign was his. "This is the decision that I came to, and I am comfortable with the decision," Kilar said.
  • But on Friday, AT&T CEO John Stankey said on CNBC, "Jeff resigned, and the decision to resign was Jeff's decision and it is an unfortunate set of circumstances."

Reality check: A few reports have since suggested that Zucker's resignation was possibly prompted by undisclosed revelations made during the network's legal battle with former primetime star Chris Cuomo.

  • Without publicly confirming any such reports, Kilar has left employees wondering whether to buy the corporate line that Zucker was forced to resign due to an undisclosed relationship with CNN chief marketing officer Allison Gollust, a longtime confidant and former direct report of Zucker's.
  • WarnerMedia has declined to respond to questions about whether other undisclosed issues led to Zucker's termination. Kilar told employees last week that the investigation is complete and there are "no plans to reveal more."

State of play: In the days since Zucker's resignation, Kilar has visited various CNN bureaus to answer questions about what happened. But in refusing to divulge too many details, he's been met by angst from top CNN talent.

  • "If we had not had Jeff Zucker here during the Trump administration, we probably would have been taken out," CNN anchor Jim Acosta said in a meeting with Washington staffers last week, per an audio recording obtained by Axios.
  • On Monday, CNN host Victor Blackwell suggested Kilar was being inconsistent with his explanation of the matter, according to audio obtained by Puck.
  • "What I’d like to know is, did you request the resignation? And was it exclusively in response to the non-disclosed relationship? I hope for an answer to those. If not, can you tell us more than, 'it’s a closed personnel matter,'" he reportedly said in a meeting between Kilar and top staffers.

Between the lines: Warner Bros., the movie studio owned by WarnerMedia, is facing its own challenges.

  • Village Roadshow Entertainment Group, co-producer of “The Matrix Resurrections," filed a lawsuit against Warner Bros. "alleging the studio parent’s decision to release the movie simultaneously on HBO Max and in theaters was a breach of contract," The Wall Street Journal first reported.
  • Village Roadshow also alleged Warner Bros. is depriving its rights to co-own and co-finance other projects that are derivative works of its films. In a statement to Axios, Warner Bros. called the lawsuit "frivolous."
  • WarnerMedia's strategy to make its entire 2021 movie slate available on HBO Max the same day they debuted in theaters caused panic in Hollywood, with high-profile director Christopher Nolan and others criticizing the move.

Be smart: In 2020, AT&T celebrated combining WarnerMedia and ad tech unit Xandr to offer better advertising options. But in the proceeding years as AT&T decided to sell WarnerMedia, Xandr was mismanaged and neglected, as Axios previously reported. In December, AT&T sold Xandr to Microsoft.

What's next: Resolving these headaches will be up to Discovery CEO David Zaslav, who will lead the newly combined company, while Kilar is expected to exit.

  • Zaslav must select a new head of CNN who appeases Zucker loyalists and other frustrated staffers and must assure Warner Bros. keeps up its relationships in Hollywood as he builds up a new streaming empire. CNN's streaming service CNN+ is expected to launch this quarter.

Editor's note: The authors of this article have both previously worked for CNN.

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