Pop diva Mariah Carey was axed by record company EMI on Wednesday with a $28 million pay-off, as the British music group decided it could not justify her huge contract after a dismal year for the company. EMI severed its ties with the Grammy-winning American vocalist after signing her to its Virgin Records label only last year in one of the most expensive recording contracts ever. Carey’s first album for Virgin, “Glitter,” fell well short of her previous hits, selling just two million copies worldwide.
EMI’s shares fell 0.72 percent to 344 pence in early trade in London, as the market braced for a higher charge on EMI’s books to account for the huge pay-off and 18.5 million pounds ($26 million) of other write-offs linked to her contract.
EMI’s new recorded music boss Alain Levy has been trawling through EMI’s business for cost savings after the group warned in September that full-year profits would dive 20 percent as the music industry suffered its worst year ever as CD sales slowed and piracy increased.
EMI was criticized last year for paying so much to sign Carey, a 31-year-old seen by critics as a fading star. At the time, the group justified the deal as building much-needed U.S. market share with the top-selling female singer of the last decade.
Carey’s contract was worth an estimated 57 million pounds ($81.6 million) for four albums. However, “Glitter” failed to cover huge marketing and video costs agreed in her contract.
EMI had gone to great efforts to kill recent speculation about her contract and denied earlier this month that it had paid or agreed to pay Carey a lump sum to get rid of her.
EMI has already parted ways with 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.
Levy has also been 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 Records UK and Ireland.
EMI, whose top artists include Robbie Williams and Kylie Minogue, said Levy would detail other plans hatched from his strategic review in March.
After two failed merger attempts with fellow music majors – first with Warner Music and then BMG – EMI has been forced to overhaul its business in an industry facing sluggish growth as CD replacement sales fade and piracy bites.
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.
Levy is expected to deliver a far from pretty picture when he unveils the results of his review in March. However, Merrill said recently in a note to clients that early indications for the critical Christmas selling period suggested EMI had held market shares in the U.S. and Europe.