(FORTUNE Magazine) – Madonna turned maternal. Courtney Love rehabbed. In the music business, it seems an image makeover is the popular ploy for morphing into the mainstream. So it's no surprise that the hottest record company of the Nineties has been recasting itself as well. The company is Interscope Records, once synonymous with "gangsta" rap. Co-founder Jimmy Iovine, a former producer for rocker Patti Smith and the Irish band U2, apparently wants to sell Interscope to entertainment conglomerate MCA, which already owns 50%. But the feds are investigating Death Row Records, the label that put Interscope on the music map, and Iovine is fending off lawsuits while struggling to keep Interscope's executives from exiting. The boyish entrepreneur, 44, has shown he has the touch--but can he play on a bigger stage?

A brief replay on Interscope: The company began in 1990 as a joint venture with Time Warner's Atlantic Records. After putting up a few million dollars to distribute Death Row's raw music, Iovine and his partner, department store scion-movie producer Ted Field, became major players in the billion-dollar rap trade. At first it didn't matter much that some of the guys behind Death Row were real-life thugs, complete with criminal records and ties to L.A. gangs, or that their cronies reportedly brought guns and drugs into Interscope's headquarters: Death Row delivered a string of multi-platinum gangsta hits. This sort of edgy fare helped Interscope attract a new partner, MCA, last year after Time Warner caved to gangsta-rap critics and dumped its Interscope stake. The company's sales have since got phat--that's big, in rap-speak--rising from $125 million to a projected $325 million this year.

Death Row's hit machine expired late last year when CEO Suge Knight was arrested on a parole violation (he has an assault record and is now in prison). Iovine, meanwhile, has turned from an Interscope specialty, shock-novelty acts like the group Marilyn Manson. He'd rather sell mass-appeal music that baby-boomers might buy. He's signed one of the most sought-after R&B producers, R. Kelly, and has helped finance a new record label for Dr. Dre, who was once a hard-core Death Row singer-producer but now preaches nonviolence. Interscope itself is getting religion: The company is distributing the first album from God's Property, an achingly cute 50-member youth choir that just debuted at No. 3 on the Billboard 200. Iovine's instincts seem right that the gospel kids can play as a pop act. Boyz II Men meets Boys' Choir of Harlem?

Iovine apparently has got the good grooves. He's known to surprise guests at his Malibu manse by spinning around in his high-tech garage, limbs flying, while belting out songs from some album-in-progress. Particularly now, industry execs are watching his every move. "Jimmy has become a real thorn in my side in the [black music] business," says Russell Simmons, CEO of hip-hop heavyweight Def Jam Music Group. "He's got the alternative rock world, the alternative black world, and he's just starting. It's pretty scary."

Can Iovine expand Interscope's scope enough to win over MCA? This depends partly on the outcome of a nasty fight with another record label over who owns the recording contract for one of today's hottest music acts, No Doubt. Interscope needs such star crossover acts to satisfy MCA, which used to be so unhip it was known as the "Music Cemetery of America." Since MCA acquired its stake in Interscope, its music group has increased its U.S. market share to 12% and begun to generate lots of cash.

The dominant chord here could be played by Edgar Bronfman Jr., the CEO of Seagram, which owns 80% of MCA. Bronfman is an entertainment devotee and a dabbling songwriter (he's penned lyrics for Celine Dion and Dionne Warwick) who, sources say, feels no rush to buy the rest of Interscope. The price might be as high as $300 million. For that kind of money, Bronfman and MCA first want proof that Interscope's hits stick and that the nasty days are done.

--Shelly Branch