Reversal of fortune

The nuking of Michael Fuchs sent shock waves through both Hollywood and Wall Street, but there had been ample clues. The first occurred during the initial press conference announcing the Time Warner-Turner deal as Gerald Levin and Ted Turner sought to explain why, though the merger of Time and Warner had proved to be a bad idea, the $ 7.5 billion addition of the Turner empire made it a good idea. Packed into the auditorium to hear their peroration were more than 200 journalists and all the various division chiefs of the combined entity.

When the press conference was over I surveyed the disparate assemblage of executives and realized that Michael Fuchs was not among them. "Where the hell's Fuchs?" I mumbled to myself without realizing that Bob Daly was standing right next to me, also craning his neck. "I don't see him either," Daly shot back, "but I'll bet he turns up in the next five minutes."

He was right. Though Fuchs had declined to sit among the good corporate soldiers during the press conference, he was instantly outside in the hallway, holding court for the writers emerging from the Levin-Turner meeting.

Over the next few weeks, the feisty, irreverent Fuchs continued to ply his own independent course. He let it be known that he was unhappy with aspects of the Turner merger; then, anointed as headof Warner Music, he proceeded to conduct the ceremonial beheadings of a series of corporate officers. All the while stories kept popping up in the press that Fuchs was deftly positioning himself as the heir apparent to the entire Time Warner-Turner empire.

It didn't quite turn out that way. What happened instead late last week was that Fuchs himself was swept aside in yet another massive management convulsion, while the vast music empire that was briefly his domain was annexed by Fuchs' longtime rivals, Daly and Terry Semel.

The whole thing was great theater, but it also underscored the one big lingering question: Is Time Warner-Turner really a viable idea?

Back in freshman economics, we were all informed that a modern corporation is a sort of giant facilitator. Through its vast resources and support systems, it empowers ordinary mortals to accomplish remarkable deeds.

Well, we have all learned that things are not quite that simple. Arguably, today's megacompanies tend to nullify, not empower, as their resources are squandered on internal turf wars and golden parachutes. Several analysts have sought to add up the payouts to Fuchs and other Time Warner execs and have come up with a figure approaching $ 200 million -- an astonishing penalty for what is euphemistically called "corporate restructuring."

Indeed, while Gerry Levin was insisting that his company had finally achieved a workable structure, some Wall Streeters remained dubious. "I think the chairman is in very tenuous shape," Larry Haverty, senior vice president at State Street Research, told the New York Times. "His choice of people ... has been lacking."

The paradox is that Levin's "choice of peo-ple" has now come down to Bob Daly and Terry Semel, two men whose modus operandi over the past two decades has been a study in contrast to the turmoil at Time Warner. Stability has been the key Daly-Semel stratagem. They have sought to bring reason and logic to a crazed landscape by building a sound infrastructure and steadfastly sticking by it.

Over the years, some Daly-Semel appointees have succumbed to periods of instability, if not downright irrationality, and yet their bosses have remained supportive, applying their own corporate version of "tough love." Amid all the Hollywood temper tantrums, one could almost hear their voices admonishing colleagues, "We're the grown-ups and it's time for the children to settle down."

At Time Warner, while the grown-ups have now been ceded the accoutrements of power, what will happen to the children? Though quarrelsome and "uncorporate," Michael Fuchs was an original. He invented an extraordinary entity called HBO. His dismissal harked back to the firing of Richard Snyder, the brilliant but "difficult" chief of Simon & Schuster who was banished from Viacom.

Originals like Fuchs and Snyder do not seem to be viewed as good corporate soldiers. Their demise is a reminder of the heavy price of corporate convulsions. It's more than a question of massive payouts: Talent relationships are splintered. Confidence is shattered.

There is a name for all this: It is known as "brain drain."

A very brainy guy, Jerry MDBUMDNMLevin knows he is in the business of creating and marketing what the lawyers call "intellectual property," otherwise known as pop culture. To stay ahead of the herd, he needs all the brain power he can mobilize.

He cannot afford more management blowups. Nor can he afford to let entities like HBO become the targets of new turf wars. Or to face incipient rebellions at New Line or Castle Rock were their "reporting structures" to be altered.

Time Warner, as Semel puts it, has functioned like "a dysfunctional family." Both Hollywood and Wall Street are now waiting for the fam ily to get its act together.