Talks Stalled in Time Warner Bid to Cut Ties to Interscope : Music: Sources say the media giant backed out of a proposed deal in which the rap label would buy back its 50% interest.

Negotiations by Time Warner to sever its ties with controversial “gangsta” rap label Interscope Records have ground to a halt after the media giant backed out of a proposed deal, sources close to the talks said Friday.

Talks broke down Aug. 10 after Warner Music Group Chairman Michael Fuchs told Interscope co-chief Ted Field that he had changed his mind about the conditions of an agreement under which Interscope would buy back Time Warner’s 50% interest in the label, sources said. Interscope officials believed the accord would be signed the following day, although Time Warner officials were not so optimistic, they said.

Negotiations are not expected to resume until after Labor Day, but sources predicted that Time Warner will wash its hands of the Westwood-based label before the U.S. presidential campaign kicks into gear this fall.

Interscope distributes music by Death Row Records, home to gangsta rap stars Dr. Dre and Snoop Doggy Dogg, and has repeatedly come under fire in recent months by C. DeLores Tucker and other rap critics, who have called on Time Warner to sever ties with the label.

Acknowledging for the first time that negotiations have been ongoing, a Time Warner spokesman said, “The deal is on pause, not on freeze.”

When the deal is finally resolved, Interscope is expected to agree to pay Time Warner an estimated $100 million over the next three to five years to buy back Time Warner’s interest--with more than $50 million due by January. Time Warner is unlikely to lose any money on the deal.

Pressure on Time Warner has escalated as Death Row prepares to release the debut album of Tha Dogg Pound, a gangsta rap group whose songs are rife with potentially offensive lyrics. Initially, Fuchs asked that the album be delayed, sources said. He then requested to preview its lyrics and was granted access to one sexually explicit track called “Bomb A.P.” due to be featured on the album, sources said.

Although Fuchs has said publicly that he has not made up his mind about how to deal with the rap controversy, his plan to cut ties with Interscope indicates that the company is eager to get out of the hard-core rap market.

While sources said the split with Interscope was motivated primarily by recent political pressure, Fuchs is also said to be unhappy about the financial terms of Interscope’s current contract. The arrangement, negotiated by executives that Fuchs has since fired, requires Time Warner to finance half of Interscope’s hefty budget but gives the firm no control over the products Interscope releases.

Sources said Time Warner will not blame the upcoming split on gangsta rap but on provisions in Interscope’s contract that prevent the media giant from monitoring or editing the creative content of Interscope’s recordings.

When the break-up is announced, both sides will be required to publicly refer to it as an amicable divorce, sources said.

But in recent days, the mood between the two camps has been anything but friendly.

Interscope and Death Row Records both filed lawsuits last week in which top executives at Time Warner were accused of scheming with Tucker, chairwoman of the National Political Congress of Black Women, to interfere with Interscope’s contracts and obtain creative and financial control over Death Row.

Time Warner entered into negotiations six weeks ago to shed its stake of Interscope and had hammered out a deal by late July. Field shook hands on the deal with Fuchs, and lawyers on both sides began drafting a proposal during the first week of August.

Interscope sources said Field and his partner Jimmy Iovine were led to believe that an agreement authorized by Time Warner would be ready to sign on Aug. 11. Indeed, Field flew from Los Angeles to New York on Aug. 7 to prepare for the announcement.

What Field did not know, however, was that Fuchs had been contacted that same day by singer Dionne Warwick, co-chairwoman of Tucker’s Washington-based group, and invited to attend a secret meeting at her home with Death Row chief Suge Knight, sources said.

Without notifying Field or Iovine, Fuchs accepted the invitation and arrived at Warwick’s Los Angeles home on Aug. 9. Fuchs left after five hours when Knight failed to show up, sources said.

According to Death Row Records’ lawsuit, Warwick and Tucker told Knight that Fuchs wanted to talk to him about splitting with Interscope and starting a new multimillion-dollar distribution venture to sell PG-rated rap that would be financed by Time Warner.

Fuchs could not be reached for comment. A Time Warner spokesman said Fuchs has never had any “business” conversation with Tucker or Warwick about Death Row or Interscope. The spokesman acknowledged that Fuchs visited Warwick’s house but only after being told that Knight wanted to meet with him to discuss rap lyrics--an allegation Knight denies.

“The notion that the chairman of the world’s biggest record company would blow into town on a corporate jet simply to chat with Suge Knight about lyrics is ludicrous,” said Death Row Records attorney David Kenner, who plans to take depositions from Fuchs and Time Warner Chairman Gerald Levin regarding the matter before Labor Day. “The reason that Michael Fuchs flew into L.A. and sat there waiting in secret for five hours was to talk about business and to get an edge up on the Interscope negotiations.”

Despite disagreement on what brought Fuchs to Los Angeles, sources in both camps agree that Fuchs was back in New York on Aug. 10 to attend a scheduled meeting with Field, at which Field confronted him about his attempt to meet privately with Knight.

According to attorneys close to the negotiations, Fuchs downplayed his trip to Warwick’s house and then told Field he had decided to “renege” on the proposed Interscope deal. After a heated discussion, a furious Field left the meeting, sources said.

A Time Warner spokesman disputed Interscope’s account of the meeting, claiming that although a number of key points in the deal had been addressed before Aug. 10, no date had been arranged to sign the agreement, which Time Warner claims still had not been completed. The spokesman said Fuchs told Field he “simply changed his mind.”