MCA to Buy Half-Stake in Interscope

Defying opponents of “gangsta rap,” MCA Inc. has completed a $200-million partnership deal with Interscope Records, the controversial Westwood label that Time Warner Inc. abandoned four months ago after a heated national debate over Interscope’s lyrics.

The agreement, under which MCA will pay Interscope founders Jimmy Iovine and Ted Field for a 50% stake in their label, with an option to acquire the remainder in three to five years, is expected to be announced within two weeks.

While it risks controversy with the move, MCA’s deal instantly bolsters the conglomerate’s credibility in the crucial rock market and catapults it from sixth to fourth in U.S. album sales.

Interscope, which will retain creative control over the label’s recordings, distributes potentially offensive rap and rock music on the cutting-edge Death Row and Nothing/TVT labels, whose rosters include stars Dr. Dre, Snoop Doggy Dogg, Tupac Shakur and Nine Inch Nails.

But MCA may be less vulnerable to criticism from media watchdogs because--unlike Time Warner--the firm is owned by Canada’s Seagram Co. and is therefore somewhat removed from the heated U.S. debate over lyrics. MCA is also less vulnerable to political pressure because, unlike Time Warner, it has no cable television interests subject to government regulation.

In addition, MCA has devised a plan to distance itself from the most provocative products by including a provision in its contracr ur’s upcoming ‘covers distribution rights only for the one Shakur project.

“Dogg Food,” the controversial album by Death Row rap duo Tha Dogg Pound that raised the ire of politicians prior to its release last fall, will continue to be distributed by EMI Music-affiliated Priority Records.

All other Interscope products will continue to be manufactured and distributed by Time Warner until April, as agreed upon when the media giant washed its hands of Interscope on Sept. 27.

Moments after Time Warner dumped Interscope, a bidding war broke out among the media giant’s five major rivals, each of which already profit from a variety of potentially offensive rap and rock music. Indeed, PolyGram and Thorn EMI each offered $125 million for a 25% stake in the label and were still in the running as recently as a week ago.

The Interscope deal was hammered out during teleconference calls between New York and Los Angeles by MCA Music Group Chairman Doug Morris and his close advisors Mel Lewinter and Zach Horowitz. MCA President Ron Meyers and Seagram Chief Executive Edgar Bronfman Jr. also played key roles in the lengthy late-night negotiations over the last 10 days.

One reason sources say Iovine and Field chose MCA is they believe that Bronfman is building an executive team that rivals the best in the business. The two are also close to Morris and entertainment impresario David Geffen, whose new DreamWorks label is also distributed by MCA. Another factor: The deal allows Iovine and Field to pocket $100 million even after they repay Time Warner the $100 million they still owe them under their separation agreement.