EMI dumps Carey with $28m payoff
LONDON, England -- Britain's EMI Group's Virgin Records label is to pay U.S. pop diva Mariah Carey $28 million to end her recording contract.
EMI said the cost, together with $26.4 million of balance sheet and other write-offs linked to Carey's giant recording deal, would be treated as exceptionals in accounts for the year ended March 31, 2002.
EMI signed Carey, 31, to its Virgin Records label last year in what was said to be the biggest recording contract ever, estimated at $80 million over four albums.
But Carey's first album, "Glitter," flopped along with a film of the same title and rumours had been running for sometime that EMI would cut its losses on its huge investment.
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.
EMI, the world's No.3 record company, had been looking at ways to slash costs after a dismal 2001.
In September last year it warned that profit for the year would slide 20 percent as conditions in the industry deteriorated.
The music giant, with artists such as Radiohead and Janet Jackson as well as Carey, said it has seen a "marked deterioration" in conditions, particularly in the U.S. and Latin America.
EMI stock, which has seen its shares soar more than 40 percent from a low of 252 pence in October, fell half a percent to 359 pence in early London trading on Wednesday. Later on Wednesday it was down one percent at 343.
The company's stock has lost more than a third of its value over the last year amid concerns about declining compact disc sales and competition from free Internet music download sites.
Before the September profit warning the company's stock had fallen 40 percent as the British music company was forced to abandon merger plans with rivals.
Its planned merger with Warner Music last year and BMG this year were scuppered by anti-competition concerns. The European Union was unwilling to see competition in the industry reduced from five players to just four.
Carey's launch of "Glitter" had been delayed and downscaled after she suffered a painfully public breakdown. It was then launched on a day when world eyes were elsewhere -- September 11.
Carey had checked herself into a hospital July 26 last year for "extreme exhaustion." Her publicist cited the singer's recent work in completing two movies, "Glitter" and "Wise Girls," while simultaneously writing, recording and producing the "Glitter" soundtrack album.
The Grammy-winning singer made her debut in 1990, and has released nine albums on the Columbia/Sony label, selling more than 150 million singles and albums worldwide.
In April, she left the Columbia/Sony label for the Virgin label.
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," Kingsley Wilson, a media analyst at niche banker Investec Henderson Crosthwaite, told Reuters.
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 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 criticised last year for paying so much to hire Carey, seen by some as a fading star. But the group justified the estimated $80 million investment as building much-needed U.S. market share. Then "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. 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.
No sparkle in 'Glitter'
September 25, 2001
EMI warns profit to slide 20 percent
Sep. 25, 2001
Carey cancels Walters interview
September 5, 2001
Mariah before breakdown
13 August 2001
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