COMPANY TOWN : Will Cacophony Muffle Music at Warner’s?

Analysts and shareholders aren’t the only ones scratching their heads these days about the chaos at Warner Music Group.

*

Frustrated representatives for some of Warner’s best-selling acts--including R.E.M., Stone Temple Pilots and Van Halen--are also concerned about the future of the $4-billion firm.

In interviews with The Times, artist representatives said they fear that Warner’s recent preoccupation with boardroom brawling has caused the corporation to lose sight of its most valuable resource: the music.

Once considered the most stable operation in the record industry, Time Warner’s music sector is reeling from a yearlong corporate blood bath that has already resulted in the ousting of five senior executives. More heads are expected to roll in the months ahead--including that of new Warner Bros. Records Chairman Danny Goldberg.

“The focus at Warner seems to have shifted from music to corporate politics, and that has a lot of artists and their managers very concerned,” said Steve Stewart, manager of the 10-million-album-selling rock group Stone Temple Pilots. “While Michael Fuchs, the new Warner Music chairman, has assured me that the label we record for is in fine shape, I think it would behoove Time Warner to establish some stability across its entire music division pretty damn soon.”

Bertis Downs, attorney for Georgia superstars R.E.M., agrees.

“When R.E.M. signed with Warner seven years ago, it was the most stable and artist-friendly institution in the business. Look at it now: It’s like a train wreck over there,” said Downs, whose 30-million-selling act has only one album left on its Warner contract. “We don’t mean to give the impression that R.E.M. is planning to bail soon. We sincerely hope that the new management can resolve the problems, but honestly, it’s beginning to feel like the chaos and the carnage may never end.”

Fuchs stunned the industry last month when he fired his firm’s domestic music chief, Doug Morris. The decision to boot Morris came just six weeks after Time Warner Chairman Gerald Levin canned Morris’ boss, Robert J. Morgado. Those dismissals followed the departures of Warner Bros. Records veterans Mo Ostin and Lenny Waronker, as well as Elektra Entertainment chief Robert Krasnow.

The upheaval comes at a time when the Warner Music Group--which includes Warner Bros. Records, the Atlantic Group and Elektra Entertainment--commands the national pop chart with more than three dozen albums in the Top 100 and a whopping 22% U.S. market share.

However, the firm’s current success can be attributed primarily to artists signed and developed under regimes loyal to recently ousted executives.

While competitors could woo away R.E.M. and Van Halen as early as next year, most of Warner’s superstar acts--including the Stone Temple Pilots--are tied to the company by long-term contracts that prevent them from jumping ship. The biggest fear is that rival labels will capitalize on the chaos at Warner to discourage new groups from joining the company.

Despite efforts in recent months to restore confidence at Warner by beefing up salaries and promoting personnel, a mood of insecurity prevails at Warner labels on both coasts, sources said.

“It’s a testament to the talent of these individuals that they get any work done at all given the paranoiac conditions they operate under,” said Ray Danniels, manager of the 60-million-selling Los Angeles rock band Van Halen, which has one album left on its Warner contract. “The company’s market share may look great now, but let’s see how it looks in two years. If Time Warner doesn’t calm things down pretty soon, they’re going to be up a creek without a paddle.”

Analysts and competing executives say that Fuchs, who came to the music group from HBO, is adept at handling creative personalities and cultivating relationships. Indeed, Fuchs has already met briefly with representatives for R.E.M. and Van Halen, and he spoke by phone with managers for the Stone Temple Pilots and Green Day, all of whom said they hope he has what it takes to restore order at the troubled conglomerate.

“Everybody knows that it’s been a difficult year at Warner Music,” Fuchs said in a phone interview from New York. “But there is not going to be anything else that goes on that causes the kind of disruption or noise--except maybe something positive--that we have experienced over the past year.

“I think it would be a grave disservice for anybody to write off a company as successful as this,” he said. “Warner has long been widely regarded as a very special place for artists, a company staffed by amazingly talented individuals--and that structure is still intact.”

Changes, however, loom.

Mounting tensions are expected to force the exit this fall of Goldberg, whom Morris promoted in January to run Warner Bros. Records after Ostin quit. Other Morris confidants in the line of fire: Melvyn R. Lewinter, Ina Lea Meibach and Ken Sunshine, top brass at Warner Music-U.S., a division created last summer that sources predict will ultimately be dissolved.

The betting is that at least some of these executives will resurface at Morris’ new Rising Tide label at MCA Music Entertainment before January.

Time Warner has already spent an estimated $50 million in severance packages to deposed music executives since October and could spend that much again to underwrite exit packages for Morris, Goldberg, Lewinter, Meibach and Sunshine, sources said.

Political pressure may also soon force Time Warner to sever ties with controversial Interscope Records, in which it has invested an estimated $120 million. Politicians who have criticized Time Warner for selling “violent and sexually degrading” music are likely to step up their attack next month when that Westwood label releases a potentially offensive album by rap duo Tha Dogg Pound.

Time Warner’s silence on the free-speech issue is viewed critically by some artist managers, who believe it could damage the media giant’s credibility in the creative community.

“The corporation hasn’t given any consideration whatsoever to the artist throughout this entire soap opera,” said Van Halen’s Danniels. “I think they forget who’s footing the bill for all these executive buyouts and salary increases. You know, Warner used to be a place where artists felt safe and secure. But things are so shaky over there now, it’s starting to make the Russian Parliament look stable.”