Company Town : Rap Critics Rejoice : Musically Challenging

Michael Fuchs joined HBO as a programming executive in 1976 and became chairman in 1984. Last month, he took over as chairman of Warner Music Group as well, and made headlines Wednesday by firing domestic music chief Doug Morris. Some of his accomplishments and the challenges he faces:

Accomplishments:

* In his decade at the top of HBO, Fuchs built the business into the most successful pay TV service in the world, with 19.2 million subscribers.

* When VCRs and home videos began to undermine services such as HBO, Fuchs moved the company aggressively into original programming to give more people an incentive to pay for television.

* Fuchs pushed HBO into international markets and into new businesses such as TV series production and interactive media.

* Under Fuchs, HBO pioneered “multiplexing”--giving viewers several feeds to choose from at the same time.

Challenges Ahead:

* Fuchs’ most pressing problem is how to deflect criticism of Time Warner’s 50% investment in Interscope Records, the controversial Westwood label championed by former domestic music chief Doug Morris. With the release of the debut album from gangsta rappers Tha Dogg Pound looming, Fuchs must find a diplomatic way to appease Time Warner directors’ concerns over potentially offensive lyrics without alienating the creative community. Selling Interscope might silence critics in the short run, but it could pose long-term problems for Time Warner’s reputation with artists.

* Fuchs must bolster allegiance among more than a dozen key executives at Warner Bros. Records, Elektra Entertainment and Atlantic Group--all of whom were groomed and elevated by the just-fired Morris. Although these employees are signed to long-term contracts, sources said Thursday that rival companies have already begun wooing some of them.

* The image of Warner Music as a refuge for independent, creative thought has been damaged in the past year. Bickering over power at Time Warner has forced the exit of four highly regarded music executives from the company. Superstar musical acts are unlikely to leave the firm, since recording artists are typically signed to long-term contracts, but Fuchs must make sure Warner can attract new artists.

REVENUE

How each of Time Warner’s units contributed to its $15.9 billion in 1994 revenue: Publishing: 21% Music: 25% Filmed entertainment: 31% Programming-HBO: 9% Cable: 14%

OPERATING INCOME

A breakout of Time Warner’s $1.6 billion in operating income in 1994: Publishing: 22% Music: 23% Filmed entertainment: 18% Programming-HBO: 15% Cable: 22%

RETURN

HBO has the highest return--operating income as a percentage of revenue--of all Time Warner divisions. Publishing: 10.0% Music: 9.1% Filmed entertainment: 5.5% Programming-HBO: 15.7% Cable: 15.2%

Source: Time Warner. Researched by JENNIFER OLDHAM / Los Angeles Times