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Disney Could Have Bought Time Warner in 2016

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“About $20 billion of long positions were liquidated last week,” Sam Bankman-Fried, the C.E.O. of the crypto derivatives exchange FTX, told DealBook. “In terms of price movements: the biggest part of it is liquidations,” he said, suggesting the worst is over. But he also noted news from China late Friday of a crackdown on Bitcoin mining and trading. This added to other news of official scrutiny that has spooked crypto investors in recent days:

  • Financial regulators in Hong Kong announced support for a legislative proposal to create a licensing scheme for virtual asset exchanges and to ban trading for investors without a minimum of $1 million in their portfolios.

  • The Bank of Canada cited crypto concerns in its annual financial system review, saying that “the rapid evolution in cryptoasset markets is an emerging financial vulnerability.”

  • Gary Gensler, the chair of the S.E.C., said that American regulators “should be ready to bring cases” involving wrongdoing in crypto markets.

  • The Treasury Department noted in a report on tax proposals that “cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” The I.R.S. said it would require more extensive reporting of crypto transactions.

Companies with Bitcoin on their balance sheets may be getting nervous. For accounting purposes, crypto is valued at its purchase price. If it goes up in value, this isn’t reflected in a company’s accounts but if it falls, the value is impaired and puts a dent in quarterly profits. Let’s check in on the three big corporate Bitcoin holders — Tesla, MicroStrategy, and Square — shall we?

  • Tesla: The electric vehicle company bought $1.5 billion in Bitcoin last quarter, at an average price of about $34,700 per coin, not far from its current price. Elon Musk has signaled that Tesla isn’t selling, but it probably isn’t buying, either.

  • MicroStrategy: The business intelligence software company has spent about $2.2 billion on Bitcoin, at an average price of $24,450. The company bought more last week and is still sitting on big gains.

  • Square: The payments company, led by the Twitter C.E.O. Jack Dorsey, bought two batches of Bitcoin for its treasury — $50 million in October at a price of about $10,600 and $170 million in February at a price of around $51,000. It took a $20 million impairment on its holdings last quarter, stemming from the drop in value from its most recent purchase. It doesn’t plan to buy any more, its C.F.O. said this month.

— Barry Diller, when asked by Andrew on CNBC’s Squawk Box whether he thinks Disney’s C.E.O., Bob Chapek, has pushed his predecessor, Bob Iger, to the sidelines, as he suggested earlier in the interview. (And “not very nicely,” per Diller.)

The investment bank Lazard has hired William McRaven, the retired Navy admiral who led the U.S. Special Operations Command, as a senior adviser for its financial advisory business. McRaven oversaw the raid that killed Osama Bin Laden.

His hiring underscores business’ concerns about geopolitics. The pandemic has highlighted the potential business risks of global interconnectedness and China’s increasing assertiveness, among the many fault lines that multinational companies face.

McRaven is the latest financial outsider to join Lazard. Memorably, the firm hired the late Vernon Jordan, the civil rights leader with a gold-plated Rolodex, in 2000. “It’s not a place that is big on golfing,” said Peter Orszag, the head of financial advisory at Lazard, himself a veteran of the Clinton and Obama administrations. Bringing such people on board brings both intellectual “content” and deep relationships around the world, Orszag said.

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After Media Detour, AT&T Confronts Old Problems

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“It would have been an amazing merger,” said David Barden, a senior research analyst at Bank of America. “It would have kind of perpetuated the AT&T juggernaut of growth through acquisition — not through organic — but it failed.”

Mr. Stephenson then looked to the attractive profit margins found in media and entertainment. In 2014, he announced a deal for DirecTV, a transaction that he promised would “redefine the industry.”

But AT&T bought into the pay-TV industry at its peak. Not long after it acquired the satellite service, consumers left in droves.

“One thing they didn’t — they could not have anticipated, was that 2014 was the last year linear video would grow,” Mr. Barden, referring to the cable TV business. “Because who was out there in the wings? This little company called Netflix.” Customers began to cut their cords and cable subscriptions began their descent.

Then came Time Warner. Numerous analysts pointed out that owning a company that makes money by distributing shows and films as widely as possible wouldn’t give AT&T any advantage. In other words, it would still have to license HBO and CNN to rivals like Verizon’s television service, or to cable giants like Comcast. AT&T would have a hard time justifying keeping the content for itself.

The Justice Department sued AT&T to block the deal, but it lost its case in court.

Makan Delrahim, the former Justice Department antitrust chief who oversaw the suit, said in an interview that AT&T’s rampant deal making was a “classic case” of corporate misbehaving. The company “did a series of mergers and acquisitions and really were not rational for their business execution,” he said, “T-Mobile, DirecTV and Time Warner. And this is the result.”

Mr. Whitacre, the founding chief executive of the modern AT&T, offered another view.

“The deals we made while I was chairman — which was a long time — was acquiring the businesses that we were familiar with, the businesses we were in,” he said in an interview. “And when I left, that changed.”

Mr. Whitacre, who is still an AT&T shareholder, said he liked the Discovery deal, getting the company back to “where we came from, if you would.”

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How a Megadeal Reunited CNN’s Jeff Zucker With a Powerful Old Friend

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All agreed that Mr. Zaslav’s takeover raised the odds that Mr. Zucker would stay put, perhaps in an expanded role that encompasses more of Discovery and Warner’s combined news and sports assets. Discovery, for instance, owns Eurosport, a European network with broadcast rights to the Olympics and major tournaments in tennis and golf.

“They were a formidable team when they were together at NBC,” said Jeff Gaspin, a former chairman of entertainment at NBCUniversal who has worked closely with both men. “They’ll make a formidable team at Warner if Jeff chooses to stay.”

The two men started at NBC in the late 1980s. They trained under Jack Welch, the chairman of General Electric, which controlled the media company, and ascended during NBC’s “Must See TV” golden age in the 1990s.

“It was a time that we would look at each other, and we believed that anything was possible,” Mr. Zaslav once said, reflecting on their salad days at NBC. Mr. Zucker eventually became chief executive; Mr. Zaslav left to run Discovery in 2007.

Prickly and blunt, Mr. Zucker is not known for befriending other executives who could become rivals down the road. But he has said he and Mr. Zaslav grew closer after they left NBC. Only a handful of guests were invited to Mr. Zucker’s intimate 50th birthday party in 2015 at a hotel in Lower Manhattan; Mr. Zaslav and his wife, Pam, made the cut.

In 2019, when Mr. Zaslav presented a career achievement award to Mr. Zucker at a starry luncheon in Midtown Manhattan, he called the CNN president “one of the greatest media leaders of all time.”

Inside CNN, the reaction to this week’s merger announcement has been happiness and relief. Mr. Zucker’s loyalists were uneasy about the prospect of his departure, and rumors flew that AT&T, facing a giant debt burden, would consider selling the highly profitable news network, perhaps leaving it in the hands of an owner less than committed to its journalistic mission.

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How AT&T Got Here, and What’s Next.

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AT&T is painting a rosy picture for the future of its media business, which it will spin off and merge with Discovery. That new streaming giant is a formidable stand-alone competitor to Netflix and Disney. The move leaves AT&T to focus on its telecom business, which looks less bright after being overshadowed by its expensive — and ultimately futile — deal-making binge in media and entertainment under its previous chief, Randall Stephenson.

The DealBook newsletter explains how AT&T got here, in three key deals:

  • A $39 billion bid to buy T-Mobile. After regulatory pushback, in 2011 AT&T walked away from an effort to become the country’s largest wireless company. T-Mobile paired up instead with Sprint, and the two went on to buy huge amounts of spectrum in the high-stakes battle for 5G, leaving AT&T behind as it lobbies regulators to step in. The failed deal hit AT&T with a $3 billion dollar breakup fee, at the time the largest ever.

  • The $67 billion acquisition of DirectTV. In 2015, AT&T bet on cable TV as a way to amass customers whom it could eventually convert to streaming. But DirectTV bled subscribers as customers cut the cord, and AT&T unloaded a stake in the company last year to TPG that valued DirectTV at about a third of its acquisition price. The deal also cost AT&T about $50 million in advisory fees, according to Refinitiv.

  • The $85 billion acquisition of Time Warner. In 2018, Stephenson called the deal a “perfect match,” but the combined group struggled to invest in its telecom business while also spending enough to compete with the entertainment specialists at Netflix and Disney. Three years later, AT&T is now spinning off the company so it can (re)focus on its quest for 5G market share. AT&T paid $94 million in advisory fees to put the two companies together and an estimated $61 million to split them apart.

buy another independent studio, MGM.

In a sign of the pressure that players face to spend big to bulk up, shares in Comcast, the telecom company that owns NBCUniversal, fell 5.5 percent on Monday.

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An Old-School Media Titan Pushes Aside an Upstart

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Mr. Kilar, 50, fashioned himself as a disrupter inclined to break with the status quo in the pursuit of innovation. He became the chief executive of WarnerMedia in April 2020. He previously had started a video streaming company called Vessel and had managed Hulu, where he gained a reputation for thwarting the desires of the entrenched media executives overseeing the company.

HBO Max made a lackluster debut just two months after his arrival at WarnerMedia. By August, Mr. Kilar dismissed Bob Greenblatt and Kevin Reilly, two longtime television executives who were in charge of the streaming service’s programming. Mr. Kilar also laid off some 1,000 employees.

Those inside the company credit Mr. Kilar with two important decisions that have better positioned the company in the current media climate. He oriented all the divisions around HBO Max. He also hammered on the importance of making HBO Max a global streaming service, accelerating its rollout. HBO Max is set to expand into Latin America and the Caribbean next month. The European launch is scheduled for later this year.

But now the television veterans are in control.

Mr. Zaslav has run Discovery since 2007. He started his media career in 1989 at NBC, ultimately helping to create cable networks like CNBC and MSNBC and expanding USA and Bravo around the world. Known for celebrity-strewn parties at his East Hampton, N.Y., estate, Mr. Zaslav has long been one of the highest-paid chief executives in media. Last year, his compensation totaled $37.7 million. In 2018, when he signed a new contract, he received more than $100 million in Discovery stock.

Richard Gelfond, the chief executive of Imax, predicted in a CNBC interview that Mr. Zaslav would bring a “diplomatic soft touch” to WarnerMedia’s shifting movie releasing strategy. “He’s been an innovator, but he knows how to do it within the confines of the existing system,” Mr. Gelfond said.

Pulling strings in the background, per his style, will be Mr. Malone.

Nicknamed the “cable cowboy,” in part because his base of operation is in Colorado, Mr. Malone, 80, is the consummate deal maker. Mr. Zaslav in Monday’s call described him as “a teacher, and a best friend and really a father to me.” He has a reputation for putting together complex transactions that limit his tax exposure. He began amassing his fortune in 1973 when he took over Tele-Communications Inc., an almost-bankrupt cable company that he grew and then sold to AT&T in 1998 for $32 billion. A subsidiary, Liberty Media, was spun off into its own entity with Mr. Malone at the helm.

Liberty holds significant stakes in a variety of entertainment companies, including Discovery, the Atlanta Braves and SiriusXM. The company purchased Formula One racing in 2016 for $4.4 billion. And in 2017, Discovery purchased Scripps Network Interactive for $11.9 billion, which added HGTV, Travel Channel and Food Network to its media arsenal.

In 2019, after selling his shares of Lionsgate, Mr. Malone increased his ownership of Discovery, purchasing $75 million of additional shares for a total 23 percent stake.

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AT&T’s WarnerMedia Group to Merge With Discovery

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It’s as if Logan Roy, the fictional patriarch of the Waystar Royco media empire on HBO’s popular series “Succession,” masterminded the deal himself: AT&T has thrown in the towel on its media business and decided to spin it off into a new company that will merge with Discovery Inc.

The transaction will combine HBO, Warner Bros. studios, CNN, TNT, TBS and several other cable networks with a host of reality-based cable channels from Discovery such as Oprah Winfrey’s OWN, HGTV, the Food Network and Animal Planet.

But it raises numerous questions about what that will mean for popular shows and streaming platforms, whether entertainment bills will go up or down, or what will happen to the people working at WarnerMedia and Discovery.

WarnerMedia is known for producing some of the industry’s biggest theatrical and television hits.

HBO last year captured more Emmys than any other network, studio or platform, and its hit shows include “Succession,” “Curb Your Enthusiasm” and “Last Week Tonight With John Oliver.” It also has a huge library that includes “The Sopranos,” “Game of Thrones” and “Sex and the City.”

Netflix, the industry leader, has over 200 million subscribers, and everyone else is far behind.

Both WarnerMedia and Discovery have invested heavily in streaming. WarnerMedia has spent billions building HBO Max, which together with the HBO cable network has about 44 million customers. Discovery has 15 million global streaming subscribers, most of them for its Discovery+ app.

The companies plan to invest more in both services to get those numbers much higher. David Zaslav, the chief executive of Discovery, who will run the new business, said on Monday that he envisioned hundreds of millions of subscribers around the world, but that will be tough as Netflix and Disney invest in new shows of their own to keep a grip on the market.

Jason Kilar, who was hired to run AT&T’s media group only last year, is most likely on his way out. He was kept in the dark about the deal until a few days ago, and he has hired a legal team to negotiate his departure, according to two people briefed on the matter.

But it could mean the elevation of other executives within WarnerMedia. On Monday, Mr. Zaslav praised Toby Emmerich, the head of the film division, Casey Bloys, who runs HBO, and Jeff Zucker, the leader of CNN. Mr. Zucker and Mr. Zaslav are also longtime golfing buddies.

When asked about his plan for the management team, Mr. Zaslav said he would not favor Discovery executives.

“Philosophically, our view is we don’t know better,” he said. “There’s a reason WarnerMedia is where it is today.”

The companies expect the deal to be finalized in the middle of next year, and they anticipate annual cost savings of $3 billion. That usually means layoffs are coming.

WarnerMedia already went through several rounds of deep staff cuts after AT&T’s purchase of the company in 2018 as Mr. Stankey, who led the unit for a time, slimmed down the operations. Executives and managers were let go as he combined HBO, Warner Bros., CNN and the other cable networks under a single management team.

When Mr. Kilar came aboard last year, he cut further. Over 2,000 employees were laid off in the process.

To realize $3 billion in cost savings will inevitably mean more layoffs — at both WarnerMedia and Discovery. Mr. Zaslav said there was “a treasure trove of talent” at WarnerMedia, and emphasized the fact that Discovery doesn’t make scripted shows.

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Jason Kilar, the WarnerMedia Chief, Is Said to Be Negotiating His Exit

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Jason Kilar has hired a legal team to negotiate his departure as chief executive of WarnerMedia, according to two people briefed on the matter. AT&T, which owns WarnerMedia, said on Monday that it had agreed to spin off the division and merge it with a rival media company, Discovery Inc.

Mr. Kilar was kept in the dark about the deal until recent days, the people said, speaking on the condition of anonymity to discuss private conversations.

A spokeswoman for WarnerMedia declined to comment.

The new company will be run by David Zaslav, 60, a media veteran and the longtime chief executive of Discovery. Mr. Zaslav and AT&T’s chief executive, John Stankey, had met over the last few months “secretly from my brownstone in Greenwich Village,” Mr. Zaslav said on a call with reporters on Monday.

Mr. Kilar, 50, was hired to run AT&T’s media group only last year. He formerly held senior jobs at Hulu and Amazon.

“Jason is a fantastic talent,” Mr. Zaslav said on the call with reporters following the announcement.

Mr. Stankey noted on the call that Mr. Kilar remained the chief executive of WarnerMedia, though he added, “David’s got a lot of decisions to make on personnel.”

Mr. Kilar on Monday morning sent a rallying-the-troops memo to WarnerMedia staff that called the merger “momentous news.” He did not get into his own future at the company.

“I recognize it will take all we’ve got to keep our collective focus on the mission,” the memo concluded. “We can do it.”

He added a smiley face emoticon.

John Koblin contributed reporting.

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AT&T, in Abrupt Turn, Will Shed Media Business in Deal With Discovery

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The merger is a significant about-face for AT&T, a telecommunications giant that got into the media business with its Time Warner foray. Industry experts questioned AT&T’s deal, and now the spinoff indicates a failed acquisition strategy.

John Stankey, the chief executive of AT&T, has looked at its media business as a way to keep its phone customers from switching to other companies. AT&T Wireless subscribers get discounts and free access to HBO Max. A deal with Discovery could include stipulations that customers would maintain those benefits.

Before he took over as chief executive last year, Mr. Stankey was the company’s chief mergers strategist. But his track record has been spotty. In addition to planning AT&T’s purchase of Time Warner, he was behind the company’s $48 billion acquisition of the satellite operator DirecTV in 2015. The service has been bleeding customers for years; in February, AT&T sold part of the business to the private equity firm TPG for about $16 billion, a third of what it originally paid.

For Discovery, the WarnerMedia deal could finally give Mr. Zaslav the size and scale he has long sought. A swashbuckling executive who can recall ratings figures off the top of his head, Mr. Zaslav represents the last of the old guard in media, a hobnobbing mogul known for hosting lavish get-togethers at his house in the Hamptons.

The new company would create a new kind of media behemoth, one that is still living off the fat profits of old-school cable, while spending those profits (and more) on streaming.

Even with increased competition, HBO remains a standout in television, and last year, once again, captured more Emmys than any other network, studio or platform, including Netflix. It has several hit shows, including “Succession,” “Curb Your Enthusiasm,” “Barry” and “Last Week Tonight With John Oliver.” It also has a huge library that includes “The Sopranos,” “Game of Thrones” and “Sex and the City.”

The Warner Bros. TV studio likewise has produced successful shows for both its parent company, WarnerMedia, and outside studios with series like “Ted Lasso” (Apple TV+), “Riverdale” (CW), “The Flight Attendant” (HBO Max) and “The Bachelor” (ABC). The Warner Bros. movie studio recently released movies like “Godzilla vs. Kong,” “Mortal Kombat” and has big coming releases like “Dune” and “The Matrix 4.”

Brooks Barnes and Lauren Hirsch contributed reporting.

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AT&T’s Big Deal With Discovery Unwinds Billions in Mergers

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Goldbelly’s growth surpassed its expectations. Sales more than quadrupled last year, and it nearly doubled the number of restaurants on its platform, to 850. That, according to Joe Ariel, its co-founder and C.E.O., was because the company allows restaurants like Di Fara pizzeria in Brooklyn and Parkway Bakery and Tavern in New Orleans to go national: “We’re basically opening up a 3,000-mile radius for restaurants.”

Can that good fortune continue? As in-person dining resumes across the U.S., Ariel concedes that Goldbelly’s phenomenal growth rate last year “is not going to happen forever.” But its newest backers believe that restaurants will keep making online sales part of their businesses. Goldbelly is also counting on maintaining its lead by spending more on marketing, offering livestreamed cooking classes and relying on the loyalty of chefs.

  • Ariel didn’t deny that the company has its eye on an I.P.O. “In the future, we do want to be a public company,” he told DealBook.

Cryptocurrency’s rise to prominence is reflected in the latest U.S. tax documents (due today, in case you forgot). This year, a virtual currency question tops Form 1040, the individual income tax return form, right after the personal identifying information. The I.R.S. wants to know: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

Yes means no, sort of. If you only bought crypto with “real currency” then you aren’t required to answer “yes,” per the I.R.S. But this guidance is not binding, which means you can’t entirely rely on it. This relatively simple question, which is generating consternation among accountants, reflects the greater state of disarray when it comes to digital asset taxation.

  • “There’s very limited guidance on crypto,” Michael Meisler, a lawyer who leads EY’s crypto tax center, told DealBook. Basic tax principles apply to digital assets and many concepts translate from the physical to digital realm, but crypto is evolving fast. The approach taxpayers take depends on their tolerance for risk, Meisler said.

Cryptocurrency is property for tax purposes. That means that there is a tax liability for every sale or purchase using crypto, said Amy Kim, the chief policy officer of the Chamber of Digital Commerce, a trade group: “Imagine reporting the gain or loss on every cup of coffee you bought at Starbucks.”

Big Crypto wants the I.R.S. to flip its script. The tax authorities have engaged in an “enforcement-focused approach,” Kim said. “We believe this approach should be reversed — issue practical guidance, then enforce that guidance against those who do not comply.”

Deals

  • Alex Rodriguez and the Jet.com cofounder Marc Lore agreed to buy the N.B.A.’s Minnesota Timberwolves and the W.N.B.A.’s Minnesota Lynx for $1.5 billion. (NYT)

  • George Soros’s investment fund was among those that scooped up stocks at a steep discount when they were offloaded by Archegos during its implosion. (Bloomberg)

  • The influential proxy adviser I.S.S. backed three of four candidates for Exxon Mobil’s board put forth by the climate-minded activist investor Engine No. 1. (Bloomberg)

Politics and policy

  • Rural areas are counting on President Biden’s infrastructure proposal, in particular its expansion of broadband access, to help attract more workers. (NYT)

  • Proponents of Biden’s planned revival of the International Entrepreneur Rule to grant start-up founders special visas say it will create thousands of new jobs. (Axios)

Tech

  • “The Deadly Toll of Amazon’s Trucking Boom” (The Information)

  • Goldman Sachs’s online consumer banking unit lost another top executive as its C.F.O., Sherry Ann Mohan, defected to JPMorgan Chase. (CNBC)

Best of the rest

  • Leslie Moonves, who was fired from CBS in 2018, will receive nothing from the $120 million the company set aside in a potential severance package. (NYT)

  • Some advice on how to prevent the re-emergence of workplace cliques as people return to the office. (FT)

  • The publicly traded New Jersey deli with a $100 million market cap that David Einhorn identified as a symptom of irrational markets has fired its C.E.O. (CNBC)

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.

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AT&T-Discovery Deal Would Create a Media Juggernaut

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Less than three years after AT&T spent over $85 billion and millions more fending off a government challenge to buy Time Warner, one the biggest prizes in media, the phone company has decided on a completely different strategy.

AT&T is in advanced talks to merge its media business, including CNN, with Discovery Inc., two people briefed on the deal said on Sunday. The plan would incorporate all of AT&T’s Warner Media assets, which include HBO and Warner Bros., one of the people said. The parties could announce a deal as soon as Monday, this person said, saying that the talks were not yet complete and final details had not been worked out.

Should AT&T and Discovery agree on a deal, it would combine two of the largest media businesses in the country. AT&T’s WarnerMedia group also includes the sports-heavy cable networks TNT and TBS. Discovery has a strong lineup of reality-based cable channels, including Oprah Winfrey’s OWN, HGTV, the Food Network and Animal Planet.

WarnerMedia is run by Jason Kilar, 50, one of the early pioneers of streaming and the first chief executive of Hulu. David Zaslav, 60, has been the head of Discovery for 14 years and helped it grow into a reality behemoth. It’s unclear who would lead the new business.

reported on the possible deal.

The transaction would create a new company bigger than Netflix or NBCUniversal. WarnerMedia and Discovery together generated more than $41 billion in sales last year, with an operating profit of over $10 billion. That would have vaulted it ahead of Netflix and NBCUniversal and behind the Walt Disney Company.

In other words, to compete for audiences increasingly glued to Facebook, YouTube or TikTok, media companies need to get even bigger. It could set off another round of media deals.

Both AT&T and Discovery have invested heavily in streaming in an effort to compete with Netflix and Disney. AT&T has plowed billions into creating HBO Max, a streaming platform that now has about 20 million customers. Discovery has 15 million streaming subscribers around the world, most of them for its Discovery+ app.

The merger would also be a significant about-face for AT&T, a telecommunications giant better known for servicing fiber lines and cell towers than producing entertainment and courting Hollywood talent. Industry observers questioned AT&T’s daring purchase of Time Warner at a time when cord-cutting was only accelerating. The spinoff indicates a failed acquisition strategy.

“AT&T didn’t know what they were buying,” said Brian Wieser, a longtime Wall Street analyst. “The strategy underpinning” the acquisition “was probably flawed.”

Brooks Barnes, Lauren Hirsch and Andrew Ross Sorkin contributed reporting.

This is a developing story. Check back for updates.

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