Turner Perks Up About Time Warner's Wasteful Ways

No one could ever accuse Ted Turner of being shy or holding back his feelings.

Now, inside Time Warner, he's letting it be known that he won't tolerate corporate waste at the entertainment giant that recently acquired his cable empire.

Sources say Turner, the company's new vice chairman and its largest shareholder, has been particularly critical of various Time Warner entertainment perks such as corporate jets, vacation compounds and valuable works of art that populate the walls of the company's corporate headquarters in New York.

Although purging itself of perks won't make a significant dent in Time Warner's $17.5-billion debt, Turner's criticisms go to the heart of a corporate culture marked by excess even in an industry known for its self-indulgence.

Turner, by contrast, is a notorious penny-pincher and bootstrapper. He is said to be incensed about what he views as excessive corporate fat at Time Warner, especially in light of the fact that he recently had to accept deep cuts--about 1,000 employees--at his various Turner Broadcasting System divisions to eliminate redundancy--for savings of about $100 million.

As part of the downsizing, he had to shutter his fledgling movie label, Turner Pictures, whose first and last release, "Michael," starring John Travolta, is a huge hit at the box office.

"Turner is really turning the screws," said a source associated with Time Warner, who suggested it is time someone did, given the company's stalled stock price. He added: "The outside board of directors--the shareholders--are getting miffed that the stock has stayed in a negative position for years. I know I am."

Even before closing the merger, Turner was making noises about Time Warner having to make substantial cost cuts and take other drastic measures to shrink its massive debt and boost its share values.

Time Warner Chairman Gerald Levin has been under rising pressure to improve the stock price, which has languished during his tenure. Even members of the board who were once loyal to Levin are discussing the "public relations" merits of removing him, according to one large shareholder.

At Turner's prompting last fall, Time Warner retained the management consulting firm McKinsey & Co. to scrutinize divisions of the company and its notorious entertainment perks. At the same time, a committee led by Time Warner President Richard Parsons was formed to eliminate corporate waste in a process that will roll out, division by division, over the next year to cut expenses and reap "meaningful" savings, according to one source.

Some divisions have already devised plans for trimming back. Time Warner is preparing to streamline several departments in its troubled music division. Elektra Entertainment and Atlantic Group have already trimmed dozens of recording acts and fired more than 100 employees, and sources said Warner Bros. Records is next up on the chopping block, with downsizing anticipated this year in its staff and artist roster.


The corporation also expects to cut additional costs in the music sector by consolidating back-office operations in its human resources, legal, travel and accounting departments at all three record labels as well as within its WEA distribution arm--a move that could eliminate as many as four dozen jobs, sources said. The international music division, which has been struggling for the last two years, is also being scrutinized for possible pruning.

The cost-cutting process was initiated long before Turner arrived, although it's intensifying this year. For example, he said, the company decided early last year to sell three of its seven aircraft, with a helicopter sold in the last 60 days and two Challengers currently on the block for an estimated $12 million each.

Turner has his own plane (not a jet but a Cessna 750), which he paid for himself. When he uses the plane for business purposes, the company picks up the tab, said a source close to Turner.


One large shareholder, who credited Turner with accelerating the belt-tightening, acknowledged that cutting perks will not solve the company's debt problem.

"This is not a practical solution, but it shows how Ted is trying to change the culture," he said. "He's trying to make business sense out of the company and is creating a small earthquake."

Turner is said to have complained about what sources called Time Warner's substantial modern art collection, some of which is on display in executive conference rooms and in the waiting rooms at HBO. Last year, in the Time Warner boardroom, Turner made a stink about the art on the walls, sources say.

The company's legendary leader, the late Steve Ross, who preceded Levin as chairman, was an avid art collector, and sources close to the company say his holdings have been winnowed significantly and continue to be sold off.

The corporation is also said to be reviewing its ownership of a chalet in Aspen, Colo., and two mountaintop villas in Las Brisas, near Acapulco--one of which is equipped with a private gym, swimming pool and indoor tennis court. One Aspen property, owned by the music division, was leased to an outside party before Turner arrived.

Levin, who sources say hired his wife to refurbish one of the six-bedroom villas in Mexico, vacations there with his family. In recent years, the corporation has used the villas to wine and dine a bevy of entertainers, including Clint Eastwood, Sylvester Stallone, Barbra Streisand and the rock band Foreigner, transporting them in and out on corporate jets.

Whereas other studios have planes and New York apartments to cut down on hotel bills, Time Warner is in a category of its own in regard to these perks.


The source of such indulgences can be traced to Ross, whose name was synonymous with extravagance and with a fondness for indulging stars and company executives in luxuries he himself enjoyed. In her 1994 biography, "Master of the Game," author Connie Bruck wrote of Ross, ". . . he had under his dominion a business that seemed to ratify his predilections, one where his taste for luxury and flamboyance could be construed as having a business purpose."

Bruck writes that shortly after Ross' arrival, limos were provided for corporate executives and heads of the entertainment divisions. In 1970, the company bought its first plane, a Falcon, a year later a Gulfstream 2, and the next year, a helicopter.


Warner also purchased its first house in Mexico, near the Las Brisas resort overlooking Acapulco Bay, which Ross dubbed "Villa Eden." He hired the wife of Ahmet Ertegun, the legendary co-founder of Warner's Atlantic Records, to redecorate the house, which was remodeled with tennis courts, a screening room and a kidney-shaped pool.

Turner may be as flamboyant as Ross, but in his business operations is tightfisted rather than extravagant. And the new scrutiny he is introducing is creating waves on Time Warner's genteel board of directors, which have been on the receiving end of the corporate largess. Two years ago, Levin flew them around the world.

"He's shaking up the board," said one source close to Time Warner. "It had been a cohesive and tight group and now everyone is testing each other, trying to take the temperature."


Times staff writer Chuck Philips contributed to this report.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World