Time Warner Inc.'s handling of its music division over the last year is surely one of the most bizarre chapters of corporate management in recent history.
Warner Music Group--which consists of Warner Bros. Records, Elektra Entertainment and Atlantic Group--is the most successful music company in the world and the most profitable division of the company. Yet the corporation has tortured and fired its top executives in wave after wave for more than a year.
The division is still making money hand over fist, although two of its three key record labels did not make their numbers during the third quarter. Warner Music posted a $144-million third-quarter loss due primarily to sluggish international sales and a write-off from a closed mail-order business.
Warner’s current success can be attributed primarily to artists signed and developed under previous regimes. Some of those artists, including R.E.M., have expressed concerns about the turmoil.
Warner Music’s decision to sell Interscope Records, one of the most cutting-edge labels in the business, has also raised questions about what creative direction the company plans to take in the years to come. The decision to dump Interscope was made after critics cited the label’s controversial rap lyrics.
The biggest fear within Warner is that rival labels will capitalize on the chaos and try to woo away top acts and discourage new performers from joining the company.
Here are some highlights of the executive exodus and other recent tumult at Time Warner’s Warner Music Group:
July, 1994: Elektra Entertainment Chairman Robert Krasnow, a 13-year Warner Atlantic veteran, quits the day after Warner Music Group Chairman Robert Morgado announces a new chain of command. Krasnow later strikes a deal with MCA to run his own label.
August, 1994: Following a corporate battle with Morgado and being told he would have to report to music executive Doug Morris, Mo Ostin, who ran Warner Bros. Records for three lucrative decades, announces he will quit the label when his contract ends Dec. 31, 1994.
October, 1994: Fed up with the corporate war, Lenny Waronker, former Warner Bros. Records president, rejects an offer from Time Warner to take Ostin’s job and announces he will leave the company when his contract expires. Later that month, Morris is elevated to chairman of Warner’s domestic sector, leaving Morgado in charge only of international operations. Morgado appoints Danny Goldberg to take over Ostin’s job at Warner Bros. Records.
April, 1995: Time Warner Chairman Gerald Levin flies Ostin to a Time Warner villa in Acapulco and tries to lure him and Waronker back into the fold by offering them a valuable deal to launch their own label.
May, 1995: Levin ousts Morgado. Sources say Levin fired Morgado because of repeated complaints from Morris and other executives about Morgado’s interference in the domestic operation. Morgado is replaced by HBO chief Michael Fuchs, who tells reporters he is counting on Morris to help him guide the record sector. Later that month, Time Warner is attacked by Senate Majority Leader Bob Dole and others for profiting from potentially offensive pop music.
June, 1995: Fuchs abruptly fires Morris, just two days before Morris was to be promoted to chief executive of the global music sector. Within a month, Morris resurfaces with his own Rising Tide label, financed by MCA.
July, 1995: Fuchs and Levin try again to lure Ostin and Waronker back to Time Warner and fill senior executive posts in the music division in the wake of Morris’ firing. Meanwhile, reacting to political pressure, Fuchs begins negotiations to sever ties with Westwood-based Interscope Records, home of controversial “gangsta” rap music.
August, 1995: Fuchs fires Melvyn R. Lewinter, president and chief operating officer of its domestic music sector. Fuchs pressures Warner Bros. Records Chairman Danny Goldberg to quit after eight months on the job and replaces him with Russ Thyrett.
September, 1995: Time Warner announces that it will sell its 50% stake in Interscope. Ostin and Waronker sign an agreement to run the music division of DreamWorks SKG, which has a distribution deal with MCA.
Thursday: Fuchs is fired and replaced by Bob Daly and Terry Semel. MCA fires its longtime global music chief, Al Teller, and replaces him with Morris.