1990s
Through the 1990s, Time Warner was the largest media company in the world, with assets in excess of US$20 billion and annual revenues in the billions of dollars; by 1991, Warner's music labels were generating sales valued at more than US$3 billion, with operating profits of $550 million, and by 1995, its music division dominated the US music industry with a 22% share of the domestic market.[35][36] Acquisitions and corporate changes within the Warner group of labels continued after the Time Warner merger in 1990, WEA purchased French label Carrere Records, in 1992 it bought the leading French classical label Erato, and in 1993, it bought the Spanish DRO Records, Hungary's Magneoton label, the Swedish Telegram Records, Brazil's Continental Records and Finnish label Fazer Musiikki. WEA was renamed Warner Music in 1991. Time Warner became Time Warner Entertainment in 1992.
Atlantic launched two new subsidiary labels in the early 1990s: East West Records and Interscope Records. In 1995, East West absorbed Atco Records and was eventually folded into Elektra Records. In 1996, after causing much controversy, Interscope was purchased by MCA Music Entertainment.
During 1992, Warner Music faced one of the most serious public-relations crises in its history when a major controversy erupted over the provocative Warner Bros. recording "Cop Killer" from the self-titled album by Body Count, a heavy metal/rap fusion band led by Ice-T. Unfortunately for Warner, the song (which mentioned the Rodney King case) was issued just before the controversial acquittal of the police charged with King's beating, which sparked the 1992 Los Angeles Riots and the confluence of events put the song under the national spotlight. Complaints escalated over the summer—conservative police associations called for a boycott of Time Warner products, politicians including President George H. W. Bush denounced the label for releasing the song, Warner executives received death threats, Time Warner stockholders threatened to pull out of the company and the New Zealand police commissioner unsuccessfully tried to have the record banned there. Although Ice-T later voluntarily reissued Body Count without "Cop Killer", the furor seriously rattled Warner Music and in January 1993 the label made an undisclosed deal releasing Ice-T from his contract and returning the Body Count master tapes to him.[37]
Also in 1992, the Rhino Records label signed a distribution agreement with Atlantic Records and Time Warner Entertainment bought a 50% stake in the Rhino Records label. The distribution agreement allowed Rhino to begin reissuing recordings from Atlantic's back catalogue.
In 1994, Canadian beverage giant Seagram bought a 14.5% stake in Time Warner, and the Warner publishing division — now called Warner/Chappell Music – acquired CPP/Belwin, becoming the world's largest owner of song copyrights and the world's largest publisher of printed music. In 1996, Time Warner Entertainment made another dramatic expansion of its media holdings, taking over the Turner Broadcasting System, which by then included the Turner cable TV network, CNN and the screen production houses Castle Rock Entertainment and New Line Cinema, acquisitions that brought huge profits into the Warner Group thanks to content assets like Seinfeld and the highly successful The Lord of the Rings film trilogy.
By the early 1990s, senior Warner staff like Ostin and Waronker had remained in their positions for several decades—a highly unusual situation in the American music industry—but the death of Steve Ross destabilized the Time Warner hierarchy, and over the next few years the music group was increasingly disrupted by internal power struggles, leading to a string of major executive upheavals in 1994–95, which The New York Times described as "a virtual civil war".[38]
The central conflict was between Mo Ostin and Warner Music Group chairman Robert Morgado, who had joined the Warner group in the late 1980s. Because of his political background (he had been the chief-of-staff to former New York governor Hugh L. Carey) and his lack of music industry experience — especially compared to the widely revered Ostin—Morgado was viewed as an outsider at Warner. Nevertheless, he gained favour with Ross and Levin and was promoted in 1985 to oversee the Warner international music division after helping the company slash costs in its computer game sector.[36]
Since his appointment as head of WBR, Ostin had always reported directly to Steve Ross and his successor Gerald Levin, but in late 1993, when Ostin's contract came up for renewal, Morgado asserted his authority, insisting that Ostin should now report directly to him. The tensions between them reached boiling point in July 1994 when Morgado appointed former Atlantic chief Doug Morris to head the Warner Music Group in the US, a decision that many saw as a deliberate move to hasten the departure of Ostin and Elektra head Robert Krasnow.[36] Morgado's new structure was announced in August 1994 and Bob Krasnow resigned from Elektra the next day. Within days, after more than 30 years with the Warner music group and more than 20 years as president and chairman of Warner Bros. Records, Ostin announced he would not renew his current contract and would leave Warners when it expired on December 31, 1994. There was more negative publicity the following month, when leading Elektra act Metallica launched a lawsuit against the label, seeking a release from their contract and ownership of their master tapes, and claiming that Morgado had refused to honor a deal they had worked out with Krasnow before he quit.
Ostin's departure marked a seismic shift in the corporate culture at WBR and the news was greeted with dismay by industry insiders and the many artists whose careers he had helped to nurture. Lenny Waronker had agreed to take over as WBR chairman and CEO but in October 1994 he announced that he would not be taking up the position; he initially said that he would remain as President of WBR, but by this time there was already widespread speculation that he would leave, and he did so soon afterwards.[39] The following year he re-joined Ostin and son Michael as joint head of the newly launched DreamWorks label.[40]
Beginning in August 1994, Morgado alienated Morris by his clumsy handling of Warner's relationship with Interscope Records, the successful label founded by Ted Field and Jimmy Iovine and part-owned by Warner. Morgado had resisted making a decision about increasing the Warner stake in Interscope, which encouraged other companies to make overtures to the label; in response, Morgado threatened to send cease-and-desist notices to executives at several record companies, demanding that they stop approaching Interscope with buyout offers, a move that reportedly infuriated Iovine.[36]
By late 1994, Morris was gaining the upper hand over his rival and media reports claimed that Morris had moved to settle with Metallica, offering a deal that was reportedly even more generous than the one they had worked out with Krasnow. Morgado now faced a showdown with Morris, who felt he was not being allowed to run WMG as he saw fit. In October 1994, Morris and 11 other Warner executives "staged an unprecedented insurrection that nearly paralyzed the world's largest record company".[36] This led to a climactic meeting between Morris and Gerald Levin in late October, at which Morris reportedly threatened to quit if he had to continue to report to Morgado.[41]
Morgado gave in to the demand that Morris be granted autonomy to run the North American operations and he was forced to upgrade Morris's position from chief operating officer to Chief Executive of Warner Music Group (US); Morris promptly named Danny Goldberg, former president of Atlantic Records, to run WBR in defiance of Morgado, who had a different candidate in mind and Levin also reduced Morgado's power to oversee Warner's mail-order record club division and its international operations.[42][36] Morris then brought in Sylvia Rhone and Seymour Stein to stabilize Elektra, settled the Metallica lawsuit and persuaded Levin to purchase an additional 25% of Interscope, although this initiative proved short-lived.[36][43]
The power struggle between Morgado and Morris reached a dramatic climax in May 1995 when Morgado was asked to resign by Gerald Levin, following a welter of complaints from executives at the three major Warner Music labels, who said that Morgado was undermining Morris's authority and damaging Warner's reputation among performers.[42] Morgado was immediately replaced by HBO chairman Michael J. Fuchs, but the corporate upheavals did not end there; in late June 1995 Fuchs abruptly dismissed Doug Morris, saying that Morris had been "leading a campaign to destabilize Warner Music in an effort to seize control of the company". As Morris's strongest ally, Danny Goldberg was also under threat; he was initially told that he could stay on as President of WBR as long as he refrained from office politics and concentrate on the day-to-day management of the label, but he resigned as President of Warner Bros. Records soon after to pursue "other interests", and was replaced by WBR vice-chairman Russ Thyret.
That August saw yet another resignation, that of Mel Lewinter, then president and COO of Warner Music's domestic music operations; while Lewinter being an ally of Morris played a role in the former's ouster, speculation ran rampant about it also having to do with an internal investigation into improper sales practices (involving tens of thousands of CDs being stolen from Atlantic by sales manager Nick Maria, then being secretly resold to retailers; the profits were divided between the retailers and the Atlantic employees involved), which had earlier caused 10 executives (including Maria) to lose their jobs amid the investigation.[44][45][46] Lewinter subsequently sued Warner Music for wrongful termination.[47]
Despite early success with Dr. Dre and Snoop Dogg, and Morris's decision to increase Warner's stake to 50%, by the mid-1990s Interscope Records was being seen as a liability for the Warner group. Time Warner's board and investors had already been bruised by the damaging 1992 "Cop Killer" controversy and now they were faced with renewed criticism about the gangsta rap genre, in which Interscope's associate imprint Death Row Records was a key label. In mid-1995, Time Warner refused to distribute the Interscope album Dogg Food by Tha Dogg Pound, forcing the label to seek outside distribution, and late in the year TW sold its stake in Death Row back to co-owners Jimmy Iovine and Ted Field and soon after it sold off its share in Interscope to MCA Music Entertainment.[48]
The upheaval at Warner was beneficial to its rivals, who picked up valuable executives who had left Warner. Goldberg moved over to Mercury Records; Morris joined MCA Music Entertainment Group and led its reorganization into Universal Music Group, now the world's largest record company. In November 1995, Fuchs was himself sacked by Levin, leaving the company with a reported US$60 million "golden parachute", and Time Warner co-chairmen Robert A. Daly and Terry Semel took over the running of the music division.[49][50]
In 1998, Seagram boss Edgar Bronfman Jr. held talks aimed at merging Seagram's Universal Music, headed by Morris, with the venerable British recording company EMI, but the discussions came to nothing; Bronfman then oversaw Universal's takeover by Vivendi. WEA meanwhile continued to expand its publishing empire, buying a 90% stake in the Italian recording and music publishing group Nuova Fonit Cetra.[51]
Also in 1998, Time Warner Entertainment bought the remaining 50% of the Rhino Records label they did not own. The Rhino Records retail store in Los Angeles was not included. Rhino then began reissuing the back catalogues of the Warner/Reprise and Elektra/Asylum labels. In 1999, Rhino launched Rhino Handmade, which released limited-edition reissues of lesser-known but still-significant recordings from the WEA labels.
