COMPANY TOWN : At Warner Bros. Records, Mo Ostin Loyal to the End

News of Warner Bros. Records Chairman Mo Ostin’s planned departure after 31 years brought some of his employees to the verge of tears Monday. But the 66-year-old music industry titan said has no qualms about ending his career when his contract expires in January.

“I feel fantastic,” Ostin said in a rare interview from his Burbank office. “This is exactly the right time to make this choice, and I look forward to finishing up my work here on a high note. I’m real proud of this company, and my intention is to go out in a blaze.”

Ostin’s resignation ends a long power struggle with Warner Music Group Chairman Robert Morgado, who recently reorganized the corporate management structure. The media conglomerate said Ostin will be succeeded by his protege, Warner Records President Lenny Waronker.

Waronker, 52, on Monday characterized the transition as “emotional.”

“Change is good--and there will be changes,” Waronker said. “But in terms of the important stuff--the philosophical stuff--this company will remain an artist-driven company.”

Sources on Sunday confirmed Ostin’s plans to resign. In a formal statement on Monday, Morgado praised the achievements of Ostin, who will remain as a consultant to Time Warner Chairman Gerald Levin. But industry sources widely believe that it was Morgado who pushed Ostin out. The two have been at odds since 1990, when Morgado was brought in to oversee Time Warner’s music group and insisted on direct oversight of Warner Bros. Records.

Before that, Ostin--whose savvy business skills and commitment to artist development have been revered in entertainment circles for decades--operated with autonomy, reporting only to Time Warner top brass. He dealt directly with Time Warner Chairman Steven Ross until Ross died. He then began reporting to Ross’ successor, Levin.

Tensions reached the boiling point last month, when Morgado promoted former Atlantic chief Doug Morris to run Time Warner’s new domestic music division--a move insiders say was orchestrated in part to hasten the departure of Ostin and former Elektra Entertainment chief Bob Krasnow, who resigned immediately. Under the new chain of command, all American label heads--including Ostin--were required to report to Morris.

Ostin denied music industry rumors that he harbors personal animosity toward Morgado.

“The only differences I have with Bob Morgado are philosophical differences,” Ostin said. “He has one point of view about how a company should be run and I have another, but it certainly is in no way on a personal level. And the suggestion that Doug and I have problems, well, that’s simply not true at all.

“The thing is that Warner Bros. Records has never been run from the perspective of financial people or legal people or promotion people. We’ve always been a label solely about artists and music, and that’s the way it will continue.”

Ostin has been criticized for being “too loyal” to longtime employees and too resistant to institute staff and artist roster cuts at the bloated label, which even his most ardent admirers believe is in need of streamlining. On Monday, he acknowledged that the firm could lose some fat.

“I think that’s partially true--but it’s all a matter of perspective,” Ostin said. “I have my way of how I would go through the streamlining process; somebody else may have another way of doing it.”

Ostin disagreed with recent reports in the media that his label has performed poorly compared to other music units in Warner Music Group’s $5-billion global enterprise. Despite recent hits from such rock acts as Green Day and Candlebox, Warner Bros. Records continues to be blasted by some industry newcomers as an “old folks’ home for aging superstars.”

“That’s just a bad rap created by our competitors to create misperceptions about how vital this company is,” Ostin said. “I think it’s really unfair. Everyone knows we are their prime competitor anytime it comes time to sign new acts. Some companies try to make themselves look good by trashing us. But if you look at the charts and study our profit performance over the years, we are by far the most consistent and stable company on the block.”

Indeed, Warner Bros. Records has been the envy of its competitors for decades, a virtual museum of priceless catalogues from cutting-edge artists. Ostin is highly regarded not only for bringing a philosophy to the firm that the artist is king, but also for instituting a competitive management system that remains a model for the industry.

Warner employees weren’t the only ones upset about Ostin’s resignation. Reaction among his competitors was also somber.

“This truly signals the end of an era,” said former Capitol Records CEO Joe Smith. “Mo is one of the last of the founding fathers of the ‘60s, one of the bedrock individuals who invented the ground rules for the music business as we know it.”

Arista Records chief Clive Davis concurred.

“The man is a giant among executives, and his rich and diverse legacy will live on for many years to come,” he said.