Singer's pricey exit from EMI label turns ugly

The “amicable” departure of Mariah Carey from EMI’s Virgin Records has degenerated into an ugly battle between tune titans.

A joint release issued late Tuesday night announced that Carey and EMI had decided to end her multi-album deal. Under her settlement agreement, Carey receives $28 million, in addition to the previously undisclosed payment of $21 million she received last year for her first album under the contract.

The release might have marked a graceful exit from a troubled deal. Carey, a huge star on her previous label, Columbia Records, signed a mammoth four-album, $80 million deal with EMI last year. But “Glitter,” her debut soundtrack album for EMI, flopped, along with the film. Since October, rumors have been flying that Alain Levy, the recently installed head of EMI, would buy out Carey’s contract.

But hot on the heels of the joint announcement, EMI issued its own release stating that Virgin had terminated its contract with Carey and that it would pay her $28 million to get out of the deal. The release also indicated it would write off an additional $26 million in connection with her contract.

Hours later, the Carey camp issued a statement that the EMI release was false and violated the settlement agreement. EMI responded with a statement that their release was required by London stock exchange disclosure rules.

But Carey’s lawyer, Marshall Grossman of Alschuler, Grossman, Stein & Kahan, is hopping mad. “Mariah was not happy with Virgin and she wanted out. We negotiated (Carey’s departure) for over two months. There were to be no further statements by either side other than the joint press release. EMI’s lame explanation is that they were simply reporting the $28 million payment as a public company.”

Grossman speculated about the reason behind what he considered EMI’s rogue release: “I think EMI was very truly not happy about paying $49 million, and some thoughtless bloke thought it would be cute to spin this to aggrandize EMI,” he said.

EMI’s attorney, Bert Fields, insisted that EMI’s release is not a breach of the settlement agreement. “The settlement agreement allows for immediate regulatory disclosure. (Carey’s camp) didn’t approve the release and they don’t like the word termination, but they knew there would be regulatory notice.”

Added Fields: “EMI didn’t intend to create the impression that they fired her because they didn’t. EMI’s statement and the joint release are not inconsistent.”

Options open

Grossman said Carey is exploring all her options. While litigation is considered unlikely right now, her options could include a breach of contract claim for violation of the settlement agreement or a defamation suit. “I’m hopeful this will blow over and there won’t be any litigation. It’s not in anyone’s interest,” Fields said.

At the time the deal was signed last April, EMI was under tremendous pressure to bring its venerable but somewhat stodgy artist lineup into line with modern commercial tastes, which have skewed dramatically toward hip-hop and R&B in recent years.

But the signing was little help to EMI’s already sagging bottom line: The company reported a loss of nearly $80 million for the six months ended in September, compared to an $84 million profit in the same period a year earlier. Levy was tapped in part to shore up EMI’s finances, and unwinding the Carey deal has long been seen as a top priority.

Michael Nathanson, a media analyst with Sanford Bernstein, also sees Wednesday’s announcement as a chance for Levy and right-hand man David Munns to score some points with shareholders and EMI’s board.

“This is all very neat, isn’t it?” Nathanson said. “They want to pin all the blame on old management now, and they don’t want the charges to hit the new management’s P&L.”

On the U.S. markets, investors were unimpressed: Wall Street bid EMI shares down by 2% to $9.88 in Wednesday’s trading.

Carey isn’t the first big-name act to part ways with EMI in recent months. The label group let go of David Bowie late last year as part of its ongoing bid to cut the high costs associated with veteran talent.

As for Carey’s next career move, her transactional lawyer Don Passman said: “There are a number of labels interested in her since the rumors started, and we’ll be talking to them very shortly.” However, sources close to the situation maintained that it’s unlikely the diva would again command the amount of money she garnered from EMI.

She’ll get plenty of exposure on Feb. 3, when she’ll be singing the National Anthem at the Super Bowl.

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