TIME WARNER: A COMPANY UNDER FIRE
Richard Zoglin
TARGETED AS THE CHIEF CULTURAL OFFENDER, TIME WARNER STRUGGLES TO DEFINE ITSELF
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TIME
Senator Robert Dole’s broadside last week was hardly the first occasion on which Time Warner has found itself the target of a crusade against pop culture. Two weeks earlier, William Bennett, the former Secretary of Education, and C. DeLores Tucker, head of the National Political Congress of Black Women, brought their campaign against offensive rock lyrics to the annual Time Warner shareholders’ meeting at New York’s City Center. At one point in the meeting, Tucker rose from the audience and delivered a 17-minute attack on violent and misogynistic lyrics in songs recorded by Time Warner performers. At the end of her speech, about a third of the packed audience burst into applause. Among them, notably, was a member of the Time Warner board of directors: Henry Luce III, the son of TIME’s founder.

No company likes to be told it is contributing to the moral decline of a nation. “Is this what you intended to accomplish with your careers?” Senator Robert Dole asked Time Warner executives rhetorically last week. “You have sold your souls, but must you debase our nation and threaten our children as well?” At Time Warner, however, such questions are simply the latest manifestation of the soul-searching that has embroiled the company ever since the conglomerate was born in 1990. It’s a self-examination that has, at various times, involved issues of social responsibility, creative freedom and the corporate bottom line.

At the vortex of this debate is chairman Gerald Levin, 56, who took over for the late Steve Ross in 1992. On the financial front, Levin is under pressure to boost the sagging stock price and reduce the company’s mountainous debt, which will increase to $17.3 billion after two new cable deals close. He has promised to sell off assets and restructure the company, but investors are waiting impatiently. At the same time, he must still mediate between squabbling factions in a company with two distinct corporate cultures that were mingled but never quite merged when Time Inc. acquired Warner Communications.

The flap over rap is not making life any easier for him. A cerebral, low-key chief executive, Levin has consistently defended the company’s raunchy rap music on the grounds of freedom of expression. In 1992, when Time Warner was under fire for releasing Ice-T’s violent rap song Cop Killer, Levin described rap as a legitimate expression of street culture, which deserves an outlet. “The test of any democratic society,” he wrote in a Wall Street Journal op-ed column, “lies not in how well it can control expression but in whether it gives freedom of thought and expression the widest possible latitude, however controversial or exasperating the results may sometimes be … We won’t retreat in the face of threats of boycotts or political grandstanding.”

Levin would not comment on the debate last week, but there were signs that the chairman was backing off his hard-line posture, at least to some extent. During the discussion of rock lyrics at last month’s stockholders’ meeting, Levin asserted that “music is not the cause of society’s ills” and even cited his son, a teacher in the Bronx, who uses rap to communicate with students. But he talked as well about the “balanced struggle” between creative freedom and social responsibility, and he announced that the company would launch a drive to develop industry-wide standards for the distribution and labeling of potentially objectionable music.

The 15-member Time Warner board is generally supportive of Levin and his corporate strategy. But insiders say several of them — notably Luce, former U.S. Trade Representative Carla Hills and former baseball commissioner Fay Vincent — have echoed Bennett’s concerns in conversations with Levin. “Some of us have known for many, many years that the freedoms under the First Amendment are not totally unlimited,” says Luce. “I think it is perhaps the case that some people associated with the company have belatedly come to realize this.”

One key figure in the debate is Richard Parsons, the former chairman of Dime Bank Corp. who was named to the No. 2 position of Time Warner president last October. Parsons, an African-American and a Republican, is reportedly trying to persuade Levin to make some accommodation that would defuse the issue. But company insiders say a more important move may have been the replacement in May of Warner Music chief Robert Morgado with Michael Fuchs, Levin’s longtime colleague at HBO. Company sources say Fuchs’ appointment was at least partly motivated by Levin’s perception that Warner’s fiercely independent music labels needed a stronger boss who could lead the way to developing tougher standards. The speculation from one well-informed source is that Levin and Fuchs may be preparing for a subtle U-turn in company policy on rap: first pursuing the new set of standards Levin mentioned at the annual meeting, then inviting in recording artists, producers and executives to answer a few critical questions: Do they in fact have standards of decency? What are they? What if anything is over the line? After that could come an explicit code of behavior for artists and distributors-and a retreat from some of the more egregious offenders. The process may well be slow and deliberate, if only to make sure the desired results stick.

Meanwhile, company sources happily volunteer the information that rap music represents only a small slice of Time Warner’s total revenues: $85 million last year, about 2% of the $4 billion that the music division generates and an even tinier fraction of Time Warner’s $15.9 billion in annual revenues. Translation: if the company were forced to scale back on rap, the bottom-line impact would be minimal.

The Dole controversy has opened up other fault lines in the Time Warner empire. As head of HBO, Fuchs was frequently at odds with the top executives at Warner Bros. film division, Robert Daly and Terry Semel. Some speculate that Daly and Semel were not unhappy to see Fuchs — the one company official assigned to respond publicly to Dole’s attack — aking all the corporate heat. When Robert Friedman, head of advertising and publicity for Warner Bros. films, was asked for a comment on Dole’s speech, he interestingly passed the buck. “It’s not a movie issue,” he said. “It’s more a music issue.”

Of course it is both, and more. In one sense, Time Warner’s role as the pop-culture world’s designated lightning rod seems perfectly appropriate. As the world’s largest media and entertainment conglomerate, the company is big enough to have multiple examples of virtually every product that might give people offense, from cheesy talk shows to loud heavy-metal bands. The fact that it is based in America (unlike many of its giant rivals, like Sony and Bertelsmann) makes it a compelling target. The company may also have presented an inviting bull’s-eye for Senator Dole because of its history of supporting Democratic candidates and causes. During the 1992 presidential campaign, Time Warner and its subsidiaries contributed disproportionately more to Democratic than to Republican candidates-though company figures show the discrepancy disappeared in the last congressional campaign.

Some company defenders charge that Dole was unfairly singling out Time Warner for what is a culture-wide problem. For instance, he criticized two Warner movies — Natural Born Killers (a box-office success) and True Romance (a flop), both based on stories by Quentin Tarantino — but ignored Tarantino’s critically acclaimed but equally violent Pulp Fiction and Reservoir Dogs, both released by Miramax, a division of Walt Disney Co. Disney also owns Hollywood Records, whose performers include such controversial rappers as Prince Akeem.

Still, whoever else may be doing it, Time Warner has undeniably made itself a major presence in the outer reaches of hard-edged rap. It may not be the largest distributor of rap music (the German-based Bertelsmann Music Group accounts for an 18.5% share of the rap market, compared with Time Warner’s 16.4%), but it is home to several of the biggest and baddest performers, due largely to its ownership stake in Interscope, a small label that releases Tupac Shakur, Dr. Dre and Snoop Doggy Dogg. (Earlier this year, Time Warner increased its ownership in Interscope from 25% to 50%.) The standards of taste at Warner Music labels, moreover, have at times seemed extraordinarily lax. Several years ago, Geffen Records (then affiliated with Warner Records) rejected a Geto Boys album because of its explicit lyrics about mutilating women and having sex with dead bodies. The album was immediately distributed by another Warner label.

Company officials argue that it is futile to try to stamp out rap by clamping down on a single company. When Ice-T withdrew his Cop Killer song after the 1992 controversy and left Warner Records, he was instantly picked up by another label. Warner record officials note that other major record companies — who are, after all, Time Warner competitors — have pointedly failed to come to Time Warner’s defense over the issue of rap. “Obviously,” says one senior Warner record executive, “if just Time Warner falls and commits hara-kiri, that will be great for people who hate the company. But it won’t do anything to change what kids are exposed to. It will just shift profits from one company to another.” Critics respond that this has nothing to do with what may or may not be Time Warner’s corporate responsibility for what it purveys.

After the Time Warner shareholders’ meeting last month, Tucker and Bennett aired their grievances directly in a testy meeting with company executives, among them Levin and Fuchs. It started badly: when company officials refused Tucker’s request that they read aloud the lyrics of Big Man with a Gun, a song by the alternative-rock group Nine Inch Nails (sample: “Maybe I’ll put a hole in your head/ You know, just for the f—- of it”), Tucker angrily walked out of the meeting for a time. Bennett’s direct-as-a-bullet charges (“Are you folks morally disabled?”) were met by philosophizing and historical perspective (“Elvis was more controversial in his day than some rap lyrics are today”) that Bennett took to be patronizing. When Bennett responded to one of Levin’s comments by exclaiming, “Baloney!” Levin stalked out of the room.

“I was impressed with the lack of candor,” said Bennett. “It was extremely pompous. Here were these guys in $4,000 suits making us feel like we were lucky to be getting the time of day.” Company officials, on the other hand, assert that while Tucker was reasonable and focused on solutions, Bennett seemed intent on confrontation and publicity. “He came in with no information and no credentials to discuss any of this intelligently,” says Fuchs. “I guess he thought he was the self-appointed marshal riding in on a white horse to be the arbiter of morals.”

The Dole attack was in some ways even more brutal — and potentially more dangerous. Unlike Bennett, Dole is a powerful politician, the majority leader of the Senate; at a time when Congress is considering communications legislation that could drastically affect Time Warner’s cable businesses, Levin & Co. could be forgiven for taking his speech as a direct threat of legislative retribution. Warner Music officials privately worry that Washington politics could dictate the corporation’s response.

Those who know Levin, however, consider that unlikely to be the decisive factor. More probably, it will be mounting pressure from-and increasing attention to-what appears to be a very real clamor on behalf of common sense and public sensibilities. “It’s a real moment for Time Warner to decide what it is,” says a senior Warner Music executive. The likeliest outcome at the moment, though, is that his division will not be entirely pleased by the answer.

–REPORTED BY JEFFREY H. BIRNBAUM AND MICHAEL DUFFY/WASHINGTON, ADAM COHEN AND BARBARA RUDOLPH/NEW YORK AND JEFFREY RESSNER/ LOS ANGELES