You can’t just have a bunch of companies throwing around tens of billions of dollars like confetti on New Year’s Eve without sooner or later someone asking: What in the hell is going on around here?

Thus far, no one has produced a convincing explanation of how all this adds up to a profitable business; let alone has anyone turned it into a profitable business. There used to be talk about—well, then you can charge $50 a month. But here in the semi-finals, that’s kind of out the window.

AT&T of late has been moving in strong to claim a seat at the table, basically, it seems, adopting the Netflix DSE model and making it its own. First, there was the $250,000,000 to $1,000,000,000 deal with the immortal J.J. Then they took a page out of the Amazon playbook plunking down $20 mil in Toronto for Bad Education . . . to show on HBO Supermax? Then this week, another $600,000,000 for Big Bang Theory, but that’s sorta mostly in the family . . . .

All that DSE spending has perhaps awakened some on Wall Street to remember the massive table stakes AT&T had to pay to get in this race off the cliff—$104 billion, including debt, for Time Warner, and that was after its original $67.1 billion ante, when it bought DirecTV, did not get it in the game to own the future of entertainment as expected. What's $20 million on a film no one will watch when you're about $200 billion in already? That $200 billion was not for Netflix, Spotify, and Snap but for aging assets whose best days were around the same time as most of the series currently having their nostalgic turn in the spotlight.

So far, as the Semis have unfolded, all Wall Street has been able to do is gape in awe at these big deals and celebrate their immensity by raining more money on their heads. We’ve wondered when some the big investors would start to step forward and ask, you're spending billions for what? And why do you say we need to do that?

Along comes Elliott Management, holding a mere $3.2 billion stake in AT&T, barely enough to put a sitcom episode on the air, but still, enough that the people they’ve invested their money with are obliged to pretend to take notice. Suddenly, completely impertinently, the Elliott folks are asking why having invested in a telephone company, that telephone company feels obliged to buy one-fifth of Hollywood.

Elliott, according to its letter, also is demanding that Stephenson "articulate a clear strategic rationale for why AT&T needs to own Time Warner." Elliott even quotes former Time Warner CEO Jeff Bewkes, who recently called the vertical integration of content and distribution a "fairly suspect premise."

(THR)

A clear rationale!? The temerity! 

You’ve got the wires, so you’ve got to keep people on them . . . so you need . . . stuff! And if you own the service, you can control the pricing. Well, maybe not quite yet. But someday. Anyway, since you’ve got the service, it’s better you make your own shows, otherwise, you’ll have to go out and pay half a billion dollars to license a sitcom! Well, um, anyway . . . . 

The entire industry is speeding down this path that you’ve got to own the wires and the service and be producing everything for your own service into one giant integrated phalanx that you’ll march off to do . . . something? For the sake of this, Hollywood is supposed to be ready to throw everything else out the window.

So now you have Elliott saying, excuse me and asking the kinda obvious question of why. 

Perhaps Elliott’s biggest “why?“ pertains to the Telephonies’ Man in Hollywood, the person who's been charged with managing its great leap to showbiz. WSJ writes:

This month, Mr. Stephenson elevated his longtime lieutenant John Stankey to become chief operating officer a move that sparked Elliott’s decision to go public with its grievances about AT&T’s yearslong empire-building strategy. Mr. Stankey was put in charge of DirecTV after AT&T acquired it and later moved to head up WarnerMedia, the renamed Time Warner unit inside AT&T. He is widely viewed as the heir apparent for the CEO job. But Elliott viewed his recent promotion to COO as hasty, people familiar with the matter have said.

Hasty?!

The man has come to Hollywood, mashed a bunch of separate, unrelated divisions together under one PowerPoint and a half-baked name, pushed out all his division heads (including one in which he had expressed a ringing vote of confidence not days before, notwithstanding the fact that the issues that would lead to his downfall were known all the way across the country to the whiteboards of Elliott Management), created a new flow-chart of overlapping and unclear responsibilities and priorities, thrown Netflix-like money after some mega-deals . . . . 

Yet even after all that, the little minds at Elliott Management are not at all impressed and don’t think he deserves to be head of one of the largest corporations on earth. What do you have to do to convince some people?  

Don’t get me wrong. As confused as the Warner Media umbrella may be on the outside, under it there’s plenty of top-drawer assets and talented people. The plan might be confused but in the end, talent beats the plan anyway, so everything could work out just fine.

The problem for many is now with Elliott’s example, suddenly every company on the field is going to have to look over their shoulders, wondering if they’ll be forced to explain, Now what exactly is the theory behind what you call your, I think you call it your, Drunken Sailor Era?

Since time immemorial, invaders have landed on our shores with all sorts of fantastic stories about why it was necessary for them to be here: from oil companies, to aircraft builders to liquor and barons to electronics makers—the seamless flow between their products and what Hollywood does was going to create conglomerates like the world had never known.

In the end, after they wrote off their astronomical losses and slunk out of town like the guy pushed into the pool at the wedding party, it was always clear, there’s one great reason to buy into Hollywood that keeps them all coming: because it’s a lot more fun to buy into Hollywood than it is anywhere else. 

Unfortunately, as the man said, that fun is gonna cost you. If you’re AT&T, it’s time to come up for a pretty good explanation for that mountain of receipts you’ve brought home.

The thing about activist investors is they don't go away quietly. They don't hear AT&T CEO Randall Stephenson trying to placate them and then slink away, apologizing for having bothered them in the first place. At best, they're a distraction, and perhaps a spin-off or a stock buyback satisfies their thirst. But in the meantime you're losing valuable time. More often, though, activists get what they want—starting with the heads of the people they feel made a particular stock undervalued. On the other side of the activist experience, the company may be leaner, and it may have had the impulse beaten out of them to play games that only CEOs with a hammerlock on voting control get to enjoy. But what they definitely are not are bold shapers of the future. AT&T's old-school DSE bought them a very pricey ticket to the semifinals. Now Elliott may be pushing it to the parking lot before the traffic gets too bad. 

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