Industry sources suggest that the downfall of WarnerMedia at AT&T was directly connected to the controversial decision to release all of Warner Bros.' 2021 theatrical movie releases on HBO Max as well as in theaters, for no extra cost to HBO Max subscribers.
AT&T CEO John Stankey hand-picked Jason Kilar to become the CEO of WarnerMedia, but the new spinoff of WarnerMedia that has merged with Discovery, Inc. has left Discovery, Inc. CEO David Zaslav (who is a veteran media head, being in charge of Discovery since 2007) in charge of the combined company instead of Kilar and that decision appears to be directly connected to that same-day release decision.
In general, the merger is about creating a more powerful streaming service by combining WarnerMedia's collection of high-end original content (like its many award-winning TV series. HBO has won five out of the past six Emmys for Best Drama Series and three of the past six Emmys for Best Comedy Series) with Discovery's collection of popular reality-based programming, so that the resulting new service (likely still called HBO Max) would be able to compete with Netflix and Disney+, which did not seem likely before this spinoff/merger.
However, the reason it seems that AT&T is acting now, in particular, to divest WarnerMedia is because of how much of a flop the same-day movie release plan has been for the company.
Variety explains, "[I]ndustry sources say the strategic move that made such a splash last December — when WarnerMedia at Kilar’s direction opted for simultaneous releases in theaters and on HBO Max for Warner Bros.’ 2021 movie slate — is seen as a major misstep because it is shaping up to cost the studio over $1 billion in lost box office revenue, talent profit participation payments and in high license fees paid for the movies from HBO Max. Unless the pace of HBO Max subscriber additions pick up significantly in the coming months, the high cost of the movie content for the streamer will be hard to justify."
Therefore, while it all comes back to a desire to compete with Netflix and Disney+ as the biggest streaming service around, the decision to do same-day releases flopped so hard that the company was losing so much money that it no longer made sense for AT&% to hold on to the company itself and so it instead spun it off and had it merge with Discovery, Inc, while the executive who authorized the same-day release plan has now been pushed out.
Source: Variety