By THOMAS MCCARROLL, MARTHA SMILGIS AND ADAM ZAGORIN

SCANDAL SHEET

Having plopped down a reported $20 million only a year ago, Ronald Perelman, chairman of Revlon and New World Communications Group, and David Pecker, CEO of Hachette Filipacchi Magazines, were understandably interested in what their new property, Premiere magazine, had in store for its 600,000-some circulation. But interest quickly turned to interference that has now led to the resignation of two top editors and near rebellion by the staff.

Resentment began with the listing of Perelman's wife Patricia Duff on the magazine's masthead, and grew when staff members were told to use pictures of Revlon execs in a layout. It exploded last week after Pecker spiked Premiere's California Suite column when he learned of the subject: business deals involving Sylvester Stallone and the Planet Hollywood restaurant chain, which also has venture plans with Perelman.

Whatever connection the column might have drawn, it was Pecker who pulled the trigger on the story. "Premiere is a fan magazine of Hollywood," he says. "Our readers are not interested in investigative journalism." Presumably they prefer pictures of cosmetics-company executives.

BORN-AGAIN PRODIGY?

In most businesses being first to market grants a lead not easily forfeited. McDonald's, Coke and Hertz debuted years before Burger King, Pepsi and Avis, and have held on. In the high-tech world, however, the opposite appears to obtain: early products such as Betamax and Macintosh were steamrollered by latecomers that waited for markets to mature and newer technologies to develop.

Until last week that looked to be the case for Prodigy, the country's pioneer consumer online service. Frozen by a billion-dollar debt, the company watched helplessly as America Online and CompuServe blew past in an online explosion. By the time CEO Edward Bennett arrived last spring, he was left with a simple choice: reinvent the company or fold.

He chose to reinvent. At week's end Bennett was putting the finishing touches on a leveraged buyout that would take control of Prodigy from IBM and Sears and retool it into a net-based multimedia studio. If all goes according to plan, Bennett and his team will be running a giant-content company producing sports, entertainment and news-based Websites.

While Bennett, 49, is credited with reviving a moribund VH1, analysts are skeptical about whether his rejiggered Prodigy can survive in a new-media field where even giants like AT&T have yet to make money. First to market or not, the question these days for many Web firms is whether there's a market at all.

BUFFETT'S NEW BABY

When Warren Buffett took control of Berkshire Hathaway, Inc., in 1965, the stock was worth less than $20. With prudent investments in blue-chip companies such as Coca-Cola and Capital Cities/ABC, Buffett drove BH into the low thirties--$30,000, that is. By refusing to split the stock into smaller units, Buffett effectively kept speculators at bay, until a few cagey money managers figured out that they could form investment trusts with Berkshire Hathaway shares in their portfolios and then sell fractional units at affordable prices.

Buffett complained that these trust managers were distorting the market in his company but ultimately decided that the best way to beat 'em was to join 'em. Last week shares of a new Class B stock, quickly dubbed Baby Berkshires, went on the market for a mere $1,110 per, a fraction of the mother issue's market value. The Baby B's gained $50 to hit $1,160 the first day and finished at $1,200 on Friday. Whether they'll ever grow up to be like Mama is, well, what markets are all about.

WARNING SHOTS

No one imagined that getting the Federal Trade Commission to bless the merger between Time Warner and the Turner Broadcasting System, two giants in the multibillion-dollar cable-TV business, would be a walk in the park. So it was hardly a surprise last week when leaks emanating from the FTC suggested that agency staff members favored blocking the $7.5 billion merger in its current form. Whatever the staff's inclination, the actual decision to approve or block the deal will be made by the five Federal Trade Commissioners. And they have yet to speak.

Time Warner, the owner of Home Box Office, Cinemax and the nation's second largest cable system, and Turner, which controls CNN, TNT, the Cartoon Network and TBS, remain publicly confident that the deal will ultimately be approved. If the commission should require either the sale of certain Time Warner or Turner assets or other major changes in the deal, then the merger could be in trouble--in no small part because Tele-Communications Inc., the nation's largest cable operator and an important Turner shareholder, retains the right to veto any changes it deems not in its own interests.

Time Warner and Turner, at first asked for a decision by June, but have now told the FTC not to rush, no doubt hoping further study will shift the commissioners' mood in the companies' favor.

By Thomas McCarroll, Martha Smilgis and Adam Zagorin