WarnerMedia restructuring leads to layoffs, fate of WB Games uncertain

AT&T may sell its WB Games division in a bid to significantly lower spending costs and instead license out IPs and properties to third-party studios.

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AT&T is currently restructuring its WarnerMedia division, leading to layoffs in sales and marketing divisions and labels like WB Games shifting to different areas. Sources tell Deadline that WarnerMedia is letting go employees across its divisions to reduce company spending. This move will help chip away at AT&T's massive $152 billion debt incurred from the Time Warner buyout and drastic reductions in cable subscriptions.

The layoffs and departures include high-level executives like WB Worldwide Television Distribution president Jeffrey Schlesinger, Worldwide Theater Distribution & Home Entertainment president Ron Sanders, and WB Entertainment Chief Financial Officer Kim Williams.

This layoff spree follows a big restructuring shift at WarnerMedia. The WB Games division, which is responsible for big video games like Mortal Kombat, Batman, and the newly announced Suicide Squad game, is now part of WarnerMedia's broadened Studios and Networks group, which now lumps television, movies, and games in the same umbrella.

The big question is whether or not AT&T will sell its WB Games division to further help pay off its massive hundred billion-dollar debts.

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AT&T's current total debts sit at $152 billion as of Q2'2020.

Sources say WB Games and its associated studios (Netherealm, Avalanche, Monolith, Rocksteady, WB Montreal, etc.) could be sold in a massive $4 billion deal that also includes exclusive franchise license rights to huge IPs like Mortal Kombat and the DC Universe. For comparison, this is more than the $2.5 billionMicrosoft paid for Minecraft in 2014. Minecraft is now the best-selling video game of all time with 200 million sales on all platforms.

AT&T is said to want to keep ownership of its intellectual properties for video games and interactive entertainment, especially DC properties, and may instead license the publishing rights to games-makers with the proper budgets to support them. This includes the likes of EA, Activision-Blizzard, Ubisoft, and even Microsoft and Sony.

This maneuver makes a lot of sense for WB Games, and would be similar to Disney's approach to video games. Disney no longer develops its own video games, but instead licenses the rights out to companies like Electronic Arts (Star Wars) and Square Enix (Marvel's new Avengers game).

Instead of paying the millions required to develop a game over years of time, WarnerMedia would theoretically license the properties out instead, letting another publisher pay for the development costs and then collect a royalty fee when the games are sold.

Neither AT&T or WarnerMedia's new CEO Jason Kilar has commented directly on the WB Games buyout rumors. AT&T will presenting at the Oppenheimer Technology conference tomorrow at 8AM EST, so we could hear more info about WBIE and its plans during the show.

If AT&T does sell WB Games, it's possible the development and release of big games could get disrupted or even cancelled outright. Games are often cancelled or stalled when studios change hands.

The WB Games division has a number of studios working on high-profile games including:

• Rocksteady Studios - New Suicide Squad live game
• WB Montreal - Batman Gotham Knights game
• Netherealm - Mortal Kombat 11 and possibly Injustice 3
• Avalanche - New Harry Potter RPG

Here's more info on the new WarnerMedia studios umbrella:

The Warner Bros. Motion Pictures Group continues to be led by Chairman Toby Emmerich. Warner Bros. Television Studios group continues to be led by Chairman Peter Roth. Warner Bros. Interactive remains part of the Studios and Networks group, along with our Global Brands and Franchises team including DC led by Pam Lifford, and our Kids, Young Adults and Classics business led by Tom Ascheim, all focused on engaging fans with our brands and franchises through games and other interactive experiences.