Return to Harmony at Warner Music?

With the regime of Warner Music Group Chairman Robert J. Morgado on the verge of imploding Thursday, peace was restored at an 11th-hour meeting at Time Warner Inc.’s New York headquarters.

The closed-door encounter, which was said to have resolved a heated power struggle between Morgado and his second in command, Doug Morris, was the third such session called within 12 hours--including one late Wednesday that was moderated by Time Warner Chairman Gerald Levin.

“After days of discussions, which were at times tense, we have reached a harmonious resolution on how to move forward together,” said Morris, president and chief operating officer of Warner Music’s U.S. operations. “These negotiations have been very complicated, but I’m satisfied and feel good about the future.”

Morris declined to comment further, but sources said Morgado essentially acquiesced to his lieutenant’s demand for full control of the company’s U.S. music division. Prior to the meeting, Morgado was said to have balked at signing a contract detailing Morris’ duties, even though he promoted him four months ago to run Time Warner’s domestic music operations.

Morgado issued a prepared statement late Thursday saying that “rumors regarding dissension” within his division “were without merit.” But informed sources say the standoff with Morris had threatened the future of the music industry powerhouse and possibly Morgado’s career. Tensions were running so high at Warner on Thursday that five top executives, including Atlantic Group chief Danny Goldberg and Elektra Entertainment chair Sylvia Rhone, threatened to revolt.

“Morgado was acting like Lt. Gen. Raul Cedras did before the planes were headed for Haiti,” said one senior Warner executive. “Even though he had alienated every executive he depends upon, there was no indication whatsoever he had any intention of altering his behavior.”

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The turmoil has been building since July, when Morgado established a new chain of command that led to the resignations of legendary Warner Bros. Records Chairman Mo Ostin and Elektra Entertainment chief Robert Krasnow. Warner Bros. President Lenny Waronker, who said Monday that he would not be replacing Ostin as previously announced, is also expected to leave.

Even with the agreement with Morris, Warner Music could face further problems.

R.E.M. and other top Warner Bros. artists are said to be nervous about the turmoil at the company. Sources say Tom Silverman, head of Warner-owned Tommy Boy Records, and Rick Rubin, who runs Warner-owned American Recordings, are dissatisfied with the image problems Morgado’s actions have caused the company. Other top executives who were either part of the Warner family or being courted to join Warner are now exploring other options.

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Jeff Ayeroff and Jordan Harris, who used to work at Warner before running Virgin Records, are said to have closed a label deal with Sony Music. And Morgado still hasn’t reached an agreement to buy minority-owned Interscope Records, which is being courted by other companies.

Before Thursday’s meeting, Warner insiders characterized Morgado as “arrogant” and “power-hungry” and accused him of repeatedly undermining his key executives.

Last month, members of the hard rock group Metallica publicly blamed Morgado’s behavior as the reason they filed a lawsuit in San Francisco seeking to sever their decade-long association with Elektra Entertainment.

Morgado made another misstep last week when a member of his corporate staff lobbied the managing editor of Entertainment Weekly to diminish Morris’ standing in the magazine’s current Power 101 list, sources say.

Until the day before the magazine was printed, Morris and Morgado shared the No. 19 position on the list. But Morris’ photo and name were deleted from the list after one of Morgado’s assistants called the publication’s managing editor and objected, saying that displaying the two executives side by side was “inappropriate.”

Entertainment Weekly, which is owned by Time Warner Inc., has long maintained that its coverage of the entertainment industry cannot be influenced by employees who work at Time Warner-owned music, film or book companies.

Managing Editor James W. Seymore Jr., who made the decision to pull Morris’ photo and name following several phone calls from Morgado’s office, denied that anything improper occurred. “I know how it looks, but nothing sinister happened here,” he said. “I made a mistake and I take full responsibility for it. In hindsight, it was a poor judgment call on my part.”

Time Warner’s Levin said through a spokesman that he has “the highest confidence in his managing editors at Time Warner Inc. and in the integrity of the editorial process.”

Morris said Thursday that he had put the incident behind him, calling it a “minor blip” in his long career.

Ironically, the chaos at Warner Music comes at a time when its acts are dominating the record charts. Interscope/Atlantic artist Snoop Doggy Dogg’s “Murder Was the Case” is the country’s No. 1 record. Other Top 10 sellers include R.E.M.’s “Monster,” Eric Clapton’s “From the Cradle” and Green Day’s “Dookie.” Overall, Warner Music Group has the leading market share among major U.S. distributors, with 22.05%.

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Moving man: In a move that symbolizes his new authority, Sony Pictures President Alan J. Levine took over the fabled Louis B. Mayer office Thursday. Levine inherited the space from outgoing Chairman Peter Guber, who is setting up a production company on the Sony lot.

Mayer lorded over MGM in its heyday from the third floor office inside the ornate Thalberg Building. Sony Corp. acquired the former MGM lot in Culver City as part of its purchase of Columbia Pictures Entertainment five years ago.