TIME WARNER TEMBLOR TOPPLES STRUCTURE;FUCHS LEAVING MUSIC DIVISION, PUBLISHING EXECS SHUFFLED

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Two major earthquakes rocked Time Warner's executive ranks last week, leading to the ouster of music division head Michael Fuchs and the shuffling of Time Inc. publishing executives.

Both moves are clearly tied to the big picture as the soon-to-be world's largest media company sharpens its swords for battle against other global giants such as Rupert Murdoch's News Corp. or the conglomerate of Walt Disney Co. and Capital Cities/ABC. If the grand plan unfolds as expected, marketers may see real interdivisional synergy-something that they've had very little of since Time Inc. and Warner Bros. merged in 1989.

The shadow of Ted Turner loomed large amid the changes, even though the Time Warner/Turner Broadcasting System merger still faces months of government scrutiny before its expected closing sometime next year. Once the $7.5 billion stock acquisition deal is done, the TBS chairman will be vice chairman of Time Warner and the company's single largest stockholder.

"Gerald Levin is running the company, but it's with a nod and a wink from Ted Turner, Edgar Bronfman and John Malone," said Porter Bibb, a media analyst with Ladenburg Thalmann & Co., New York.

Mr. Malone is president-CEO of Tele-Communications Inc., the largest TBS outside shareholder at 21%; Mr. Bronfman is president-CEO of Seagram Co., which holds 14.9% of Time Warner stock.

Mr. Levin is "clearing the decks, he's streamlining and finally resolving the cultural clash of Time and Warner when they came together in 1990," Mr. Bibb said. "He's also eliminating any abrasiveness that might have existed for Ted Turner."

Mr. Fuchs, who also held the title of Home Box Office chairman, had been rumored to be a potential CEO replacement if Mr. Levin stumbled. He clearly did not relish the idea of playing second fiddle to Mr. Turner.

Two of Mr. Fuchs' rivals, Robert Daly and Terry Semel, will now be chairmen and co-CEOs of both Warner Bros. and Warner Music Group.

One top executive at Time Warner, speaking of last week's changes said, "This is structurally the most important undertaking Gerry Levin has done since the merger of Time Warner."

The company seems to be setting the stage for an organizational structure that will finally strip down the corporate walls and interdivisional rivalries that shattered many past efforts at synergy.

And for marketers in the global village, it may be just in time.

"It used to be that all you needed was content," said Mr. Bibb, "but now the name of the game is critical mass. You need buying power and distribution. The ante has been upped. It's a global arena."

Last week's moves also seem to set the stage to eventually combine Time Warner/Turner operations under three divisional units: Entertainment, News & Information and Telecommunications.

So far, Wall Street seems to be applauding the new directions. On Thursday, the stock closed at 383/8, up 5/8. On Friday, the first full day of trading after the shakeups, the stock jumped up another 13/8 to 393/4.

Yet there are conflicting views on how much combining should take place. Said Al Ries, chairman of Ries & Ries, a Great Neck, N.Y., marketing consultant: "The thing that will help marketers is the division of companies, not the combining of them. Time Warner really ought to be doing what AT&T is doing, splitting up."

But one insider said the company is thinking in exactly the opposite terms. "The only way to absorb and justify the purchase price [of Turner] is to focus on synergy."

Some who have criticized Mr. Levin and Time Warner in the past feel the company is finally on the right track. "I think this move will calm the waters down in Time Warner management," said Ed Atorino, media analyst at Oppenheimer & Co., New York. "It may also finally bring some synergy to the magazine flagships that have resisted it in the past. All the other divisions-the records, the books, the music-have had synergies."

As part of the streamlining in the publishing wing, one-time rising star Robert Miller, president-CEO of Time Inc. Ventures, a Los Angeles-based subsidiary that is being abolished, is out of a job. TIV had been developing new magazines and TV shows such as `Extra" as well as supervising the non-weekly titles. The company said that the units will now report to Time Inc. New York headquarters.

Insiders say that Jim Nelson, who had been running Time Publishing Ventures from Los Angeles is expected to relocate to New York and gain jurisdiction over many of the non-weekly magazines-ranging from the American Express Publishing titles that Time manages to Martha Stewart Living and Vibe to the lifestyle titles such as Sunset and Southern Living. Mr. Nelson is a longtime colleague and ally of Don Logan, Time Inc.'s president-CEO.

One area that will not fall under Mr. Nelson's domain is international operations. They have already been reassigned to Norman Pearlstine, editor in chief of Time Inc. and Time Warner. In last week's moves, he broadened his powers and assigned new top editors at Time and Sports Illustrated. Walter Isaacson, who was Time Inc.'s new media editor, becomes managing editor of Time replacing Jim Gaines, who was named corporate editor.

There was little doubt Mr. Gaines was surprised by the move. "It's inevitable that Time editors move up to the 34th floor," he said. "This just happened a little sooner than I would have liked."

Messrs. Isaacson and Pearlstine and Tom Johnson, president-CEO of TBS' Cable News Network, are on the three-person information and news committee that is trying to figure out ways for the companies to work together after the merger. The committee, though informal in nature, signifies a type of advance planning that never took place in the frenzied activity to combine with Warner Communications back in 1989-90.

"Journalistically, we want to figure out ways to work very closely with CNN," said Mr. Pearlstine. "Can we do joint selling or branding with them internationally? Certainly those are potential areas we are looking at. Where it will work particularly well is interactive and international."

Elsewhere, Bill Colson beat out Life Managing Editor Dan Okrent to be named Sports Illustrated's managing editor. Mr. Colson has been assistant managing editor. Incumbent Mark Mulvoy was named editor and will be involved with the Olympics and other special projects.

Magazine development had been slowing in the TIV wing already and will now be further pushed back into core operations. Spinoffs such as the People-inspired In Style or Time for Kids and Time Digital will continue, however. In one recent speech, Mr. Logan referred to This Old House as a model that would be emulated. Like Martha Stewart Living, the magazine will have multiple revenue opportunities in books, TV and other venues that take it beyond the traditional magazine model of advertising and circulation, said Mr. Logan.

The last two magazines that TIV tried to launch in that manner, Mouth 2 Mouth in 1994 and Talk TV in the spring of '95, flopped.

"We're trying to do things in different ways," said Mr. Logan. "By moving everything back to New York we'll be able to get greater integration and involvement with all our development efforts."

Synergy, the reason for doing the Time Warner deal back in 1989, is being mentioned again. At one time, the avenue of most open hostility to the flamboyant style of Warner was the magazine division, with its strong tradition of journalistic independence.

The trick will now be how to combine the operations while preserving that integrity.

On the new-media front, Mr. Logan said that he doesn't expect efforts to diminish.

And the much-hyped Full Service Network in Orlando still soldiers on despite the upheavals up north.

Tom Feige remains president of FSN-a project of Time Warner Cable, which is a division of Time Warner Entertainment. The interactive TV trial, currently touting more than 2,000 subscribers, by yearend plans to introduce a news on-demand component.

"The shakeup at corporate headquarters won't touch us," said a spokeswoman for the Full Service Network. "We're still on target with our goal of 4,000 subscribers by yearend and are hard at work developing our programming."

Contributing to this story: Joe Mandese and Kim Cleland.

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Who's in, who's out

IN

Robert Daly and Terry Semel add co-chairmenship of Warner Music to their responsibilities at Warner Bros. films.

Jim Nelson, who had been running Time Publishing Ventures in Los Angeles, is expected to move to New York and get responsibility for many of the non-weekly magazines.

Walter Isaacson becomes managing editor of Time, from Time Inc.'s new

media editor; his predecessor, Jim Gaines, becomes corporate editor.

Bill Colson moves from Sports Illustrated assistant managing editor to managing editor; Mark Mulvoy moves to editor from managing editor.

OUT

Michael Fuchs departs as chairman-CEO of Warner Music and HBO chairman.

Robert Miller's job as president-CEO of Time Inc. Ventures has been eliminated.

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