Upheavals at Warner Bros. Records could cost the label its No. 1 position

By EW Staff
November 04, 1994 at 05:00 AM EST

First, the unsinkable Titanic sank. Now Warner Bros. Records, for decades the music industry’s most stable ship, finds itself navigating dangerous waters. With the imminent departure of its longtime commanders — chairman Mo Ostin, who exits next month, and president Lenny Waronker, who declined the CEO position Oct. 24 and will presumably bail out before his contract expires in 1995 — the label could lose some of its major stars, including R.E.M., Eric Clapton, and Neil Young, acts that have lined Warner Bros. pockets with an estimated $100 million since 1992. Music sources claim a ”key man” contract clause could allow bigger artists to follow the exec who signed them; Clapton might move with Waronker, who produced his career-revitalizing 1985 hit single, ”Forever Man”; and Young could go to any label his longtime ally Ostin chooses to run (Young has sent a letter to top Warner execs saying he’s not pleased with the changes at the label). And R.E.M., which owes Warner only one more album, is rumored to have already talked with Sony Music. ”There was always a very nurturing atmosphere for artists at Warner,” says a veteran indie promo exec. ”All that’s changing.” Many fingers point to Robert J. Morgado, the bottom-line-driven chairman/ CEO of the Warner Music Group, which includes the Warner Bros., Atlantic, and Elektra labels. ”Morgado’s style is slash- and-burn management,” says a Warner exec. ”Cut costs, cut jobs, go for quick hits. With Mo and Lenny, people always come first.” Morgado is also taking heat for stealing the duo’s thunder. ”You’ve got a guy trumpeting the success of Clapton and R.E.M., which he had nothing to do with,” says another insider. (Morgado was not available for comment.) The trouble began in August, with Morgado’s restructuring of WMG. His installation of former Atlantic cochairman/co-CEO Doug Morris as president/COO of Warner Music U.S. was seen as a slap to Ostin, a more senior exec, who then opted not to sign a new contract. And after Ostin and Waronker’s 28-year partnership, Waronker’s decision not to take over Ostin’s No. 1 spot has surprised few. While rumors persist that the two may soon rejoin forces, Waronker says that talk of a buyout of his contract before it ends is ”premature.” Meanwhile, Morgado must name a new CEO, and betting is heavy on Rob Dickins, chairman of War-ner Music U.K. Ltd., or Russ Thyret, a senior VP of marketing and promotion here. ”Dickins is better than a total outsider,” says a Waronker associate. ”Thyret is right under Lenny. He’s brilliant — the guy who discovered Prince in that basement.” Either way, Waronker’s Warner allies are steeling themselves. Says one: ”We’re taught to succeed at all costs, take all promotions, so it’s heroic that Lenny’s rejected that. But as a result, we better buckle our seat belts. There’s a wild ride ahead.”