Is a media-heavy telecom giant about to hive off one of its content producers?

On Friday Bloomberg, citing "people familiar with the matter," wrote that AT&T (NYSE:T) is actively searching for potential buyers for Rooster Teeth Productions, part of its WarnerMedia entertainment arm. It was unclear what price the company is aiming to get for the subsidiary, and whether or not there are interested counterparties.

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Rooster Teeth, which was founded in 2003, is a video production company based in Austin, Texas, that makes a variety of both animated and live-action content. AT&T acquired the business as part of a broader 2018 deal for a majority stake in its then-owner, Otter Media.

Under AT&T, Rooster Teeth was slimmed down. In late 2020, 13% of the production company's staff was laid off and a new general manager was brought in. Previous to that, co-founder Burnie Burns exited the company to explore new ventures.

The unit has not done well in recent years. According to one of Bloomberg's sources, its annual revenue fell to roughly $50 million in 2019; the previous year Rooster Teeth reaped around $70 million.

The "for sale" sign in Rooster Teeth's window is part of a broader move to jettison non-core AT&T assets. As with other major telecoms, the company plans to widen its high-speed 5G network, an undertaking that promises to be an expensive and long-duration project. It also aims to continue building out its fiber-optic assets.

In the entertainment sphere, the company prefers to put money into productions for its successful video streamer HBO Max.

Investors didn't appear to be confident of a windfall with the Rooster Teeth sale. AT&T stock lagged behind the broader market Friday, inching up only 0.1% compared to the 1.1% rise of the S&P 500 index.

 
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