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   again sell its streaming content to other distributors; and it promptly   
   struck a renewed deal to distribute HBO Max through Amazon. It was pretty   
   much the strategy that Mr. Bewkes had advocated during his appearance   
   before AT&T’s board, except that four years and billions in market   
   capitalization had disappeared in the interim.   
      
   Mr. Zaslav was especially upset at what he saw as projections that had   
   overstated the value of Warner Media. Teams of lawyers examined the   
   figures and questioned Warner Media’s internal finance officers.   
      
   Gunnar Wiedenfels, Warner’s new chief financial officer, alluded to the   
   issue during Warner’s earnings call on Aug. 4. “Certain legacy Warner   
   Media budget projections that were made available to us before closing   
   varied from what we now view as legacy Warner Media’s budget baseline   
   post-closing,” Mr. Wiedenfels said, putting the discrepancy at “roughly $2   
   billion.”   
      
   A Warner Bros. Discovery spokesman, Nathaniel Brown, declined to identify   
   what Discovery had taken issue with. Others said it included the $350   
   million budgeted for CNN+ and accounting tactics that Discovery believed   
   overstated revenue and understated costs at the studio.   
      
   Asked about these issues and Mr. Wiedenfels’s statement, the AT&T   
   spokesman, Mr. Cook, said Discovery and the three law firms that advised   
   it had full access to all of Warner Media’s audited financial statements   
   through Dec. 31, 2021. The merger agreement also stated that Discovery   
   could not rely on projections or budgets beyond that date.   
      
   AT&T acknowledged that it hadn’t disclosed spending at CNN+ or at the   
   Warner studio, or its post-Dec. 31 margins at HBO, deeming that to be   
   highly competitive information. Sharing it before closing, the company   
   said, could have been seen as an antitrust violation. And AT&T stressed   
   that Warner had subsequently filed its own audited financial statements   
   that failed to note any accounting issues.   
      
   In conversations with other media figures, Mr. Zaslav stopped short of   
   accusing AT&T of fraud, but did express anger, three people familiar with   
   the conversations said.   
      
   Mr. Zaslav had to tread carefully, given that AT&T appointed seven of   
   Warner Bros. Discovery’s 13 board members. Mr. Brown denied that Mr.   
   Zaslav ever discussed taking the issues to AT&T’s board unless AT&T   
   offered substantial compensation to Warner Bros. Discovery.   
      
   AT&T did agree to pay the $1.2 billion in cash and to again offer HBO Max   
   to its wireless customers. It disclosed the payment in an Aug. 4 filing   
   with the Securities and Exchange Commission.   
      
   Mr. Brown wouldn’t say how those concessions had come about but said all   
   disputes with AT&T had been resolved satisfactorily. Mr. Zaslav declined   
   to be interviewed.   
      
   AT&T’s Mr. Cook wouldn’t comment on any communications between Mr. Zaslav,   
   Mr. Stankey and AT&T’s board. A so-called purchase price adjustment clause   
   was part of the merger agreement, and he said the HBO Max-AT&T wireless   
   deal had been renegotiated in the normal course of business.   
      
   Also on Aug. 4, Warner Bros. Discovery reported a $3.4 billion adjusted   
   quarterly loss, $1 billion of it related to merger costs. The results were   
   far worse than expected. Its new direct-to-consumer unit, which includes   
   HBO Max, lost $560 million during the quarter, and costs soared 33 percent   
   to $2.7 billion.   
      
   Warner reported its latest earnings on Nov. 3. Even with HBO’s successful   
   launch of “House of the Dragon,” the direct-to-consumer operation lost   
   $634 million. Overall revenues declined 7 percent, missing Wall Street   
   estimates, and the company reported a $2.3 billion operating loss. The   
   next day, the company’s stock dropped 13 percent, hitting a new low.   
      
   Mr. Zaslav said this week that HBO’s earnings had dropped $3 billion in a   
   short period of time, from $2.5 billion in profit in 2019.   
      
   No regrets   
      
   In fairness to Mr. Stephenson and Mr. Stankey, the principal architects of   
   AT&T’s ill-fated foray into media and entertainment, their efforts were   
   handicapped by events beyond their control. The government’s antitrust   
   suit cost them two years, leaving them even further behind their rivals.   
   It was their misfortune to make a multibillion-dollar bet on streaming   
   just as investors’ infatuation with the model started to fade.   
      
   On the creative front, Warner Media could point to many successes. In   
   September, it won 40 Emmys, the most of any company. Thirty-four went to   
   HBO and four to HBO Max. Warner Bros. led the 2022 Academy Awards with   
   seven wins.   
      
   But for sheer strategic miscalculation and poor execution, AT&T’s   
   management of Warner Media may have no rival in recent corporate history.   
      
   Yet there has been no accountability on the part of the AT&T board or   
   shareholders. Mr. Stankey remains chief executive and has been hailed for   
   his bold decisions to unload DirectTV and Warner Media, even though he was   
   in large part responsible for buying them.   
      
   Last year, Mr. Stankey earned $24.8 million at AT&T. Mr. Stephenson left   
   with a pension valued at $64 million and $27.4 million in deferred   
   compensation.   
      
   Mr. Stephenson said in our recent interview that serious cultural issues   
   had hindered the merger. Some of the “media people never really gave us a   
   chance,” he said. “They were resentful from the beginning that a big phone   
   company from Texas was buying them.” (Mr. Bewkes acknowledged that there   
   was some truth to that.)   
      
   And Mr. Stephenson said that had he known Mr. Trump would win the   
   presidency, he probably wouldn’t have done the deal in light of Mr.   
   Trump’s open hostility.   
      
   “I wouldn’t have put my employees or Time Warner’s employees through   
   that,” he said, referring to the antitrust case. “It was a terrible time.”   
      
   But “put that aside,” he said, and he would have done the deal again. He   
   noted that HBO had doubled its digital subscriptions under AT&T’s   
   ownership. “HBO had been a stagnant business for 10 years,” he said. “We   
   made it an exciting and dynamic business again.”   
      
   (Former Time Warner executives took strong issue with that. Mr. Bewkes   
   said that HBO had record revenue, profits and subscriber growth at the   
   time the AT&T deal was announced.)   
      
   In response to questions about the merger, AT&T issued this statement:   
      
   “The Time Warner that AT&T acquired enjoyed world-class assets and talent   
   but had no discernible path to building a global direct-to-consumer   
   business. By contrast, when AT&T sold WarnerMedia to Discovery, the same   
   business was growing and competing globally in ways it never could have   
   prior to our acquisition.”   
      
   Mr. Bewkes said he had no regrets about selling Time Warner when he did,   
   and his shareholders have every reason to be grateful. But it has been   
   “heartbreaking,” he said, to watch the fate of the Warner properties — and   
   the talented people — he once managed.   
      
   “The level of malpractice is something I would never have believed   
   possible,” he said of AT&T’s stewardship. “The value destruction has been   
   monumental.”   
      
   A correction was made on Nov. 19, 2022: An earlier version of this article   
   misstated the size of HBO’s loss in earnings, based on public comments by   
   the chief executive of Warner Bros. Discovery, David Zaslav. Its earnings   
   dropped $3 billion, from $2.5 billion in profit in 2019. It did not lose   
   $3 billion. The figure was later clarified by the company’s chief   
   financial officer, Gunnar Wiedenfels.   
   The earlier version also misstated the given name of an activist investor   
   and hedge fund manager. He is Paul Singer, not Peter.   
      
      
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