Warner Music appoints a new CEO

So far, in the entertainment business, it qualifies as the palace coup of the year. On May 3, media giant Time Warner forced out Robert Morgado, 52, chairman and CEO of Warner Music Group, the largest music company in the world, and replaced him with Michael Fuchs, 49, the man credited with building HBO into a cable-TV powerhouse. The choice of Fuchs, who has no music experience, was surprising, but perhaps strategically clever. Only days before, reports circulated that Fuchs was being wooed to jump ship and take over MCA Inc. While Fuchs won’t comment on talking with MCA, he now has every reason to stay at Time Warner (this magazine’s parent company). The newly anointed chairman of Warner Music and still the chairman of HBO, he commands a domain with combined revenues of $5.5 billion (34.5 percent of Time Warner’s total) and becomes the potential heir apparent to Time Warner CEO Gerald Levin.

But by taking over for Morgado, Fuchs inherits a battle-scarred empire. Last year, Morgado won an ugly power struggle with Mo Ostin, the legendary head of Warner Bros. Records, that led to Ostin’s departure. But Morgado didn’t fare as well after repeated run-ins with his chief deputy, Doug Morris, 55. Executives at Warner’s labels — Warner Bros., Atlantic, and Elektra/EastWest — complained that Morgado, a relentless number cruncher with a background in politics, lacked appreciation for the nuances of the biz. They felt he was undermining Morris’ authority and jeopardizing relationships with artists such as Eric Clapton, R.E.M., and Neil Young.

”The bells broke out here the day [Morgado’s resignation] was announced,” says a top Warner Music Group exec and Ostin fan. ”In some ways it was a vindication of what they put Mo through.”

But Warner’s new godfather faces a formidable task. Fuchs must resolve the internal feuding at Warner Music and keep one of Time Warner’s most profitable divisions hot in an increasingly crowded — and competitive — field. On the record, of course, he’s optimistic. ”I’m not a music person, but I know talent when I see it,” Fuchs says. ”There’s hardly a comedian in this country who didn’t get their start on HBO.” It’ll take more than good humor to keep Warner Music in tune:

—Can Fuchs keep the talent happy? True, like Morgado, Fuchs hails from the business rather than the creative side. But unlike Morgado, industry insiders say, Fuchs knows how to handle the artistic temperament. ”He understands that it’s the talent that makes the company go,” says Matt Blank, Showtime CEO. Nor are many worried about Fuchs’ lack of music experience. Lee Masters, CEO of E! Entertainment Television (HBO is its managing partner), says Fuchs fostered the best creative environment in the business at HBO and believes he will rely on Morris’ expertise at Warner Music. Masters speculates that Fuchs will ask Morris, ”’What’s your plan? How much will it take?’ Then he’ll say, ‘go do it.”’

—Can he play nice with his fellow division heads? Probably not, especially when it comes to Robert Daly and Terry Semel, cochairmen and co-CEOs of Warner Bros.’ strong movie division. Fuchs is known as the consummate corporate politician, but after clashes over license fees for Warner products and HBO’s investment in Savoy Pictures, Daly and Semel reportedly can’t stand him. It doesn’t help that Fuchs has long enjoyed a cozy relationship with Time Warner chairman Levin — a fellow cable-TV vet and friend of 18 years. ”Fuchs does things to really irritate [Daly and Semel],” says a high-ranking Warner executive. ”Once he supposedly came to a movie set and later made a snide remark to the brass, something like ‘No wonder movie costs are out of control.”’ Industry observers say there’s a chance that a testy Semel may be more receptive to an overture from friend Edgar Bronfman Jr., the Seagram’s billionaire who recently bought MCA.