UPDATE 1-EMI dumps Mariah Carey with $28 mln pay-off

LONDON Jan 23 (Reuters) EMI severed its ties with U.S. vocalist Carey after signing her to its Virgin Records label only last year in the most expensive
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LONDON Jan 23 (Reuters)

EMI severed its ties with U.S. vocalist Carey after signing her toits Virgin Records label only last year in the most expensive recordingcontract ever. Carey's first album release for EMI, Glitter, fell wellshort of previous hits, selling just two million copies.

EMI's shares fell 0.72 percent to 344 pence in early trade inLondon, as the market braced for a higher charge on EMI's books toaccount for the huge pay-off and 18.5 million pounds ($26 million) ofother write-offs linked to her contract.

EMI's new recorded music boss Alain Levy has been trawling throughEMI's business for cost savings after the group warned in Septemberthat full-year profits would dive 20 percent as the music industrysuffered its worst year ever as CD sales slowed and piracyincreased.

EMI was criticised last year for paying so much to hire Carey, a31-year-old seen by critics as a fading star. At the time, the groupjustified the deal as building much-needed U.S. market share with thetop-selling female singer of the last decade.

Carey's contract was worth an estimated 57 million pounds ($81.6million) for four albums. However, Glitter failed to cover hugemarketing and video costs agreed in her contract.

EMI had gone to great efforts to kill recent speculation about hercontract and denied earlier this month that it had paid or agreed topay Carey a lump sum to get rid of her.


EMI has already parted ways with rock legend David Bowie and Levyhad been in negotiations for some time to offload Carey -- a relic ofhis predecessor Ken Berry who was sacked last year after failing reviveEMI's fading U.S. business.

Levy has also been restructuring EMI's labels. Last week, he axedVirgin Records UK head Paul Conroy and put the unit under the sameumbrella as the EMI label -- a division that Tony Wadsworth will headas 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 inMarch.

After two failed merger attempts with fellow music majors -- firstwith Warner Music and then BMG -- EMI has been forced to overhaul itsbusiness in an industry facing sluggish growth as CD replacement salesfade and piracy bites.

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

Levy is expected to deliver a far from pretty picture when heunveils the results of his review in March. However, Merrill saidrecently in a note to clients that early indications for the criticalChristmas selling period suggested EMI had held market shares in theU.S. and Europe.