Why Did TW Give Fuchs The Boot?

Almost a month has gone by since the headline-grabbing dismissal of Michael Fuchs by his longtime ally, Gerald Levin, and most people in the entertainment industry are still asking one rather basic question:

Namely, what the hell was all that about? Why would the chief of Time Warner promote a long-faithful executive to head his vaunted music division only to give him the boot six months later?

Answers to these questions are of some importance not only to the Time Warner Turner empire, but also to the industry at large. Corporate convulsions cast doubt over the efficacy of megamergers of this magnitude. At the Western Cable Show last week, Ted Turner himself alluded to the “conglomerated hodgepodge” produced by massive mergers, acknowledging: “Consolidation means less diversity, and that is sad.”

A longtime friend of Fuchs, Turner is known to be daunted by the circumstances of his abrupt removal, and has pointed out to associates that Fuchs was representative of the sort of innovative, irreverent individual who may be out of place in the new epoch of megacompanies.

So what did happen to Michael Fuchs? Was he sandbagged? Did he self-destruct?

Conversations with the key players would indicate that the answer is “both.” Indeed, most discuss the incident with the sort of dismayed reluctance of people who have just witnessed a head-on collision – they don’t want to think about it any more.

Michael Fuchs is thinking about it a lot, however. Here was the golden boy of HBO, an egodriven 49-year-old whose whole life was wrapped up in his job and who had confided to friends that he was the likely heir to the top job at the newly consolidated Time Warner Turner – that is, if the merger ultimately cleared all of its hurdles. Earlier this year all the lights were flashing green for Fuchs. His promotion to run the lucrative operations of Warner Music still permitted him oversight of his cherished HBO. Indeed, faithful executives at HBO still ran key decisions by him and even consulted him on rough cuts of movies.

Fuchs’ energy and ambition had reached the point of being manic. He reportedly opened one meeting of senior music execs by telling them expansively, “You guys are lucky to have me. I’m management’s equivalent of Michael Jordan.” That inspired one of the assembled music men to whisper, “Sure, but don’t tell the schmuck that this is baseball.” (While a superstar at basketball, Michael Jordan was an utter failure when he tried to switch sports.)

The vehement resistance he encountered within the music industry, combined with other surprises, seemed to send Fuchs spinning off his axis, associates recollect. “Michael needed to be tough with the music guys, but he didn’t need to become Adolf Hitler, ” said one Time Warner veteran.

But the music traumas were just the start. Though a trusted senior officer of Time Warner and a member of the Turner board, Fuchs felt he had not been informed about the talks to consolidate. Once apprised that the megamerger was imminent, he started receiving phone calls from key institutional investors informing him that he was actually in line to run the Turner empire and become No. 2 at Time Warner. Efforts to elicit definitive answers from Levin, his colleague for two decades, proved fruitless.

“Michael Fuchs is an egotistical control freak, and suddenly he found himself in no man’s land,” said a top Time Warner executive.

“There were reports Bob Daly and Terry Semel would walk unless their roles were expanded. There were rumors that Gerry Levin was angry about Fuchs’ performance on the music side, that Fuchs would either be put in charge of the Turner operations or, on the other hand, that he would simply be aced out. Michael was going crazy. He’s not a lot of laughs even when he’s not going crazy, but now he was going crazy.”

Not exactly reticent by nature, Fuchs began venting his frustrations. He told key associates that he, Fuchs, deserved to be Levin’s heir apparent, not Daly, who with Semel headed the Warners side of the operation. He confided to others that Levin had given him the music job “just to bury me.” He expressed his dismay to several reporters, prompting a story in the New York Times suggesting that Fuchs was opposed to the Turner merger as a whole – what he’d intended to say was that he approved of the merger but was furious that he had not been kept “in the loop.” (Actually, Fuchs had in fact expressed his fierce opposition to the earlier, mindbendingly complex deal with US West, which, he predicted, would come back to haunt Time Warner.)

Fuchs’ relationship with Levin had always been complex. “It was almost like an older brother-younger brother sort of thing,” says one associate. “They were friendly, yet they were not so friendly.” Complex relationships, to be sure, were part of the Fuchs style. Witness Frank Biondi, now chief of Viacom: Fuchs introduced Biondi to his wife, was godfather to his child, then got Biondi fired from HBO.

“Michael Fuchs will greet me like a long-lost friend one day, then I’ll run into him a week later and he’ll be totally dismissive,” says one industry topper. “Is he bright? Sure. Should he spend some time at charm school? Goddam right!”

During the week Levin and Turner were to announce their historic merger, Fuchs’ behavior ran true to form. The night before the press conference, Fuchs was the last to show up for a hastily called cocktail party involving top execs. He was a no-show at a management lunch, and then became enmeshed in negotiations on a music deal, so that he arrived late yet again at the press conference – so late that he decided to stand at the back of the room rather than among the assembled division chiefs and other apparatchiks.

“Here’s a guy who was confiding to people that he was Levin’s successor and suddenly he’s standing at the back of the room, ” says one Time Warner executive.

No room for Fuchs

What was Fuchs thinking? Well, for one thing he was thinking about Levin’s newly espoused theories about “triangulation,” the notion of dividing up the new empire into entertainment, telecommunications and news and information. The subtext of this management structure, of course, was that there would probably be no room for Michael Fuchs. The Daly-Semel steamroller would surely take over the entertainment wing, which would likely include music, and HBO might either end up with them or with Turner.

The die was cast. It was only a matter of time before Levin played out with Fuchs the same scenario that Fuchs had enacted with several top executives at the music division. Fuchs was summoned to Levin’s office for a 2 p.m. meeting. Levin had been locked away with the board of directors all morning, and Fuchs noticed that Levin wore his “game face” – the somber look of a rabbi about to officiate at a funeral. Levin began to espouse his triangulation theories, and Fuchs cut in: “Is there a press release you want to show me?” Fuchs, to be sure, had shoved press releases in front of dismissed music execs before summoning security guards to escort them from their offices. Levin indeed came up with a release that announced Fuchs’ dismissal. There were, however, no security guards.

News of the firing sent shock waves through the already jittery empire and through the showbiz world in general. How could one of the best-known managers in the industry get axed so summarily? Would there be a further price for “triangulation”?

HBO staffers mourn

The HBO staffers in particular went into mourning. “He’s our godfather,” says one senior exec. “There’s a terrible sense of loss.”

Even the ever-feisty Ted Turner seemed abashed by the turn of events. Turner knew Fuchs had not opposed the merger, despite the press spin. Suddenly Turner was stating publicly that even he hadn’t ended up with “much of a job” postmerger. “My company will no longer exist, and that is not at all good,” he said at the Western Cable Show. Discussing the two film companies he acquired, he added, “I hope Time Warner lets New Line and Castle Rock keep their independence. We need diversity.” That Turner would describe the corporation almost in the abstract struck many as a sort of early warning.

Band plays on

Needless to say, the one sector of Time Warner that celebrated Fuchs’ departure was music, which was transferred to the control of the soft-spoken, even-tempered Terry Semel. Veterans of the music division compared Fuchs’ six-month reign to the Spanish Inquisition. Doug Morris, the ousted Warner Music U.S. chief, already has filed a $50 million lawsuit, claiming he was not even told why he was fired.

Other suits have popped up all over the landscape. Fuchs drew a special ire for his handling of the delicate Interscope situation, allegedly closing a deal to sell the label back to its owners, then informing Interscope principals that he was “reneging.” Some music industry insiders believed, in retrospect, Fuchs made a bad deal anyway.

“The one thing about Michael – when he reneges on a deal he doesn’t mince his words. He simply says, ‘I’m reneging,’ “says one exec.

Interscope principals were especially indignant about what they claim were “clandestine” meetings with vocal opponents of gangsta rap and with Suge Knight, the CEO of Death Row, the rap label distributed through Interscope.

Once again, it was Fuchs’ style as much as his actions that agitated key players. Fuchs, for example, allegedly told Mel Lewinter, Warner Music president and chief operating officer, to take a 30-day paid vacation to “cool off.” The day Lewinter returned, he was fired. Sure enough, security guards were standing in his office with an attorney to watch as he packed his belongings and made a hasty exit.

“Fuchs operated in a virtual monopoly situation at HBO, ” said one senior executive. “He lived in a protective environment that he controlled. Suddenly he was out there in the harsh cold world and he had no idea how to conduct himself.”

Fuchs’ allies regard this as nonsense. “Michael went in to that job (at the music division) to clean up the mess,” says one close associate. “That was his assignment, and he carried it out. It was only after the fact that he realized he had been set up. Levin had set the trap and Michael had walked right into it.”

A trap?

Was it a trap? Gerry Levin, for one, insists he doesn’t believe in traps. Those close to Levin, however, acknowledge that, once the Turner consolidation became a reality, Fuchs’ future became a question mark. In other words, not long after Fuchs was given the music job and the “noise level” of his actions began to intensify, Levin started to conclude that Fuchs’ role in the “new” corporate entity was at best cloudy.

“I don’t believe a trap was set,” said one Time Warner official. “But I do believe that Michael began to stumble at the same time that Gerry Levin and the board came to the conclusion that the Daly-Semel team fit more suitably into the scheme of things. Michael Fuchs was suddenly triangularized out of his career.”

Will things quiet down now at Time Warner? That is the question being asked most urgently by Wall Street as well as Hollywood. The cost of all the golden parachutes already approaches $100 million-$150 million, according to informed sources. The idea of the Turner merger was to gain “cross-divisional growth opportunities,” not to pay off fired executives. One insider said Time Warner anticipated these cross-divisional synergies next year might aggregate between $200 million and $300 million.

If that calculation is valid, it may even cover the company’s parachute bill. Meanwhile, Michael Fuchs is looking for a new job at a non-triangular corporation.

-/. Max Robins, Adam Sandler and John Dempsey contributed to this story.

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