AT&T's media business is in trouble, with layoffs and a DirecTV sale
posted Sunday Oct 11, 2020 by Scott Ertz
When AT&T purchased DirecTV in 2015, a lot of people were surprised by the purchase. The brand had been struggling for years and AT&T was not a player in the media space. The idea that AT&T thought that they could revitalize a brand that was completely outside of their wheelhouse was a concern for investors and DirecTV subscribers. In the 5 years since the purchase, things have only gotten worse. AT&T has been sued by investors and investigated by the government. The last resort for the brand was to sell the brand.
This week, it was revealed that there is almost no interest in DirecTV. According to The New York Post, initial bids have been incredibly low.
Opening bids from a coterie of buyout firms came in at around 3.5 times DirecTV's roughly $4.5 billion of EBITDA, implying a valuation at around $15.75 billion, according to a source close to the process.
AT&T is receiving bids in the $16 billion range, while they paid around $67 billion for the brand just 5 years ago. This would represent a fire sale on the level of Myspace, which was purchased by News Corp for $580 million and sold for $35 million. Despite this massive drop in valuation, AT&T is moving ahead with the sale, though they are hoping to receive a second round of bids.
Following this news, AT&T announced other issues related to the global lockdown in the media division. Layoffs in the thousands are headed to the entertainment division, including HBO, Warner Bros, and other WarnerMedia properties. At the beginning of the year, WarnerMedia had almost 30,000 employees. There were already layoffs earlier in the year, and now thousands more will be without jobs. In a statement, WarnerMedia said,
Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic. That includes an acceleration in shifting consumer behavior, especially in the way content is being viewed. We shared with our employees recently that the organization will be restructured to respond to those changes and prioritize growth opportunities, with an emphasis on direct-to-consumer. We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.
All of this should be worrying for both AT&T shareholders and employees. Layoffs are not the sign of a thriving business, and AT&T has proven they have not been able to keep control over its acquired media brands. Sure, the lockdowns have changed the face of media, with production coming to a stop across the globe, but these troubles started long before the lockdown. With the confused HBO streaming brands, massive price increases, and more, the media aspirations of AT&T might be falling apart.
