Entertainment

Mariah Carey Gets Golden Parachute

By CBSNews.com staff CBSNews.com staff

January 23, 2002 / 10:55 AM EST / CBS

Pop diva Mariah Carey found herself out of a job on Wednesday when record company EMI paid her $28 million to walk away from the biggest recording contract of all time, in a move to cut costs.

British-based EMI Group confirmed weeks of speculation that it was severing ties with the U.S. vocalist after signing her to its Virgin Records label in a mammoth deal last year, only to see her first release Glitter sell a mere two million copies.

The axing comes at a bad time for 31-year-old Carey whose professional and private life has topped gossip columns since the collapse of her marriage to Sony Music boss Tommy Mottola, who discovered Carey as an 18-year-old waitress.

The singer suffered a painfully public breakdown last year, delaying Glitter which was then released on September 11. Ill-health then prevented Carey from promoting the album, resulting in a huge loss for EMI which had hoped the album would match the success of previous hits such as Music Box.

The singer's stardom was forged from a wholesome image and soaring ballads that highlighted her multi-octave voice.

But over the last few years, her image has changed. After her divorce from Mottola, her once demure image became sexier. She also switched musically, using more hip-hop beats instead of the adult contemporary sound that made her famous.

Some analysts questioned whether EMI was being rash in scrapping the star after one ill-fated album, given that she still ranks as one of the top selling artists of all time.

"EMI took an executive view on whether she was past it or not and whether she would ever generate the kind of album sales she did in the past again. It's a huge gamble for music groups investing in these artists," said Kingsley Wilson, a media analyst at niche banker Investec Henderson Crosthwaite.

After two failed merger attempts with fellow music majors Warner Music and BMG, EMI has been forced to overhaul its business in an industry facing sluggish growth as CD replacement sales fade and piracy bites.

EMI's new recorded music boss Alain Levy has been trawling through the sprawling music group for possible cost savings after warning in September that 2001 profits would dive 20 percent in the industry's worst year on record.

EMI also recently parted ways with costly rock legend David Bowie and Levy had been in negotiations for some time to offload Carey -- a relic of his predecessor Ken Berry who was sacked last year after failing revive EMI's fading U.S. business.

Berry was criticized last year for paying so much to hire Carey, seen by some as a fading star. At the time, the group justified the estimated at 57 million pound four-album deal as building much-needed U.S. market share. But Glitter failed to cover huge marketing and video costs agreed in Carey's contract.

"The irony is Carey will probably go to another label and come out with huge hit," said one music analyst.

EMI had gone to great efforts to kill recent speulation about Carey's contract and denied earlier this month that it had paid or agreed to pay Carey a lump sum to get rid of her.

Levy has also been busy restructuring EMI's labels. Last week, he axed Virgin Records UK head Paul Conroy and put the unit under the same umbrella as the EMI label -- a division that Tony Wadsworth will head as CEO of EMI Recorded Music UK and Ireland.

EMI, the world's third biggest music group whose top-selling artists include Robbie Williams, said Levy would detail other plans hatched from his strategic review in March.

Levy is expected to deliver a far from pretty picture when he unveils the results of his review.

Music sales are estimated to have fallen between five and 10 percent last year and are expected to slip another three percent this year as consumers divert spending in the downturn.

However, analysts had already expected a previously flagged restructuring charge of 100 million pounds to head higher as a result of rationalising of the group's roster and labels.

Analysts also expect EMI to cut its full-year dividend by as much as 50 percent when it unveils full-year results in May.

Banking sources said on Wednesday EMI was raising a 1.3 billion pound syndicated loan to refinance existing debt and ratings agency Standard & Poor's said it was cutting its credit ratings for EMI due to difficult trading in the music market.

On the upside, Merrill Lynch said in a recent note to clients that early indications for the critical Christmas period suggested EMI had held market shares in the U.S. and Europe.