Company Town : Rap Critics Rejoice : In Fuchs, Warner Music Has a Man With a Record

The marriage of Time Inc. and Warner Communications has been edgy from Day One. And Gerald Levin, the chairman of Time Warner Inc., has made an awkward marriage counselor at best, with the internecine clash between Time’s blue-blood culture and Warner’s entrepreneurial edge flaring out of control again this week with yet another power struggle at the top of Warner Music Group.

But Levin may have finally stumbled upon a way to bring the freewheeling music group, at least, into the corporate fold--and soothe a board already made nervous by a sagging stock price and criticism of its producing controversial gangsta rap music.

His name is Michael Fuchs.

Fuchs, who has headed Time Warner’s HBO division since 1984, was given additional responsibilities as chairman of Warner Music Group six weeks ago, after Robert Morgado was ousted. Even his detractors admit that his record at HBO suggests that if anyone can make the business grow while easing turmoil in the group--which has lost a slate of revered music executives in the past year to mutiny and power struggles--Fuchs can.

“Music is a very insular business; you have to have a feel for it,” said one Time Warner executive. “Fuchs is a good creative manager, although I’m not sure that movies and television translate to music. But winners are usually winners. And the performance at HBO puts him in that category.”

Fuchs took over at HBO at a time when the videocassette recorder threatened to extinguish pay TV. But by spending heavily on original programming--getting stars such as James Garner to play in “Barbarians at the Gate” and Barbra Streisand to appear in concert on HBO--the pay channel not only survived, it left its main competitor, Showtime, in the dust.

In addition to creating what is regarded today as the Cadillac of cable services, Fuchs built HBO into the division of Time Warner with the highest returns, surpassing television, movies, publishing, cable and even the biggest cash machine of all, music.

“HBO is the Marines: It’s lean, it’s efficient, it’s the best in the business,” said Fuchs, who is 49, has never been married and is probably among the most eligible bachelors in Manhattan. (He’s known around town to lavish dates with weekend getaways and gifts.) Fuchs is determined to do the same thing for the music group, tightening financial controls and improving cooperation between labels that have historically operated as independent businesses.

But executives within Time Warner say his determination extends to running the entire company.

Wall Street is skeptical of Levin’s unbending and expensive vision for using an expanding cable network to deliver video, voice and data into the home. The vision has kept the company’s debt high and its stock price static.

Board members were relieved this week when Time Warner stock broke $40 with the blockbuster opening last weekend of “Batman Forever.” (Time Warner shares closed up 87.5 cents on Thursday at $42.50 on the New York Stock Exchange.) But sources say the board still worries that the low price could invite a hostile suitor who could pick off Time Warner by buying the 15% stake in the company that Seagram Co. holds and consolidating that position with the help of restive institutional investors.

Some executives speculate that when Michael Ovitz passed on the chance to run MCA, he was holding out for the top job at Time Warner. Michael Fuchs may well covet that job too, and he is said by executives within the company to have been furious last year when Levin chose board member Richard Parsons, formerly head of Dime Savings Bank, rather than him as president.

For his part, Fuchs says he has his hands full at the moment with HBO and with his new responsibilities for the world’s largest record company.

“I’ve got a great job. I love these two companies. This is stimulating and new. It’s unusual to have this kind of challenge at this time point in your career. I’m not sleeping much, but I’m determined to show these people they can count on me.”

Fuchs certainly won the loyalty of his staff at HBO. He is praised for galvanizing the HBO team, which was warring and in chaos when he took charge in 1984. Since Fuchs initiated a 10% staff reduction, HBO has enjoyed a turnover rate that is among the lowest in the entertainment business.

Yet he is feared, perhaps, as much as respected by his employees--as well as by other executives--for his decisive, tough and confrontational style. Executives at Time Warner say Fuchs’ abrupt dismissal Wednesday of Doug Morris as the head of the U.S. music operation was in keeping with his take-no-prisoners approach and his insistence that people under him fall in line with his views and respect his authority.

“He’s a leader and expects to have people who will follow him,” said Bridget Potter, who resigned as head of original programming at HBO when Fuchs recently reorganized the group. “He had the most appropriate and the clearest vision for HBO, and everyone went along. He made it a crusade. He’s great with a hand mike and wrote jokes for many stand-up comics on HBO. He has a personal dynamism that affects every interaction.”

Beyond his reputation with employees, Fuchs is universally praised for the high quality of HBO’s original programming, such as the movie on AIDS based on the book “And the Band Played On.” Fuchs’ first job at HBO was as chief of sports and original programming, where he learned the value of talent and how to nurture it.

Whether he can transfer those skills to the rough-and-tumble music world remains to be seen. The group is battle-worn, with new heads having been installed at the top of all three labels since last year.

Beyond employee morale, Fuchs also has to deal with critics who have called on Time Warner to stop producing gangsta rap, a genre they describe as offensive and exploitative.

Fuchs seems undecided on how he will handle rap. “You have to know what crosses the line and what doesn’t, and right now I don’t.”

People who know him, though, says Michael Fuchs never lacks a plan.