Virgin Loses Its Innocence

It's a rock-and-roll saga tailor-made for VH1's "Behind the Music." A distinguished British record mogul shepherds his 19-year-old girlfriend into a powerful position at his label, provoking the ire of several colleagues. The two marry, but the union is dogged by gossip that her dealings with the talent are too close for comfort. They eventually file for divorce, but before the split is even final, she's caught in an embarrassing relationship with one of the label's up-and-coming singers. Then, just as their personal life hits bottom, their $80 million superstar has a breakdown.

Up next: EMI Group and its Virgin Records grapple with the fallout from Ken and Nancy Berry's marital mess and Mariah Carey's meltdown.

Until last month, things at the record company were looking up. Carey was getting ready to release her first album since joining Virgin, Lenny Kravitz's greatest-hits compilation was selling fantastically and Mick Jagger had been brought onboard, thanks to the efforts of Nancy, 41, who serves as vice chairman of Virgin Music Group. Dealings even seemed to be quiet between the Berrys, whose 1999 divorce has yet to be finalized. But then Nancy's relationship with Duane Levold, the twentysomething lead singer of the Canadian band Custom, turned into a public-relations nightmare when he forwarded to Virgin's lawyers allegedly threatening voice mails she left him after they broke up, according to two people familiar with the saga. In the wake of the voice-mail incident, Custom asked to be released from Virgin. The label will likely eat the $750,000 it paid to make the alternative-rock band's first record, and Custom will soon be poised to snag an even more lucrative deal with a rival label. Representatives for the Berrys and Levold all declined to comment, and the three could not be reached. "We are not going to comment on press speculation about Nancy," said an EMI spokeswoman.

Far more dire for EMI is the shaky state of play with Virgin's most expensive corporate asset, Mariah Carey. It was bad enough that Carey's first single from her upcoming "Glitter" album had been a tough sell: not until Virgin slashed the price on the single "Loverboy" to 49 cents earlier this summer did it soar up the charts. Then the buxom vocalist was hospitalized last week for an "emotional and physical breakdown"--but not before she'd done an impromptu striptease on MTV's "Total Request Live" and posted rambling Web-site dispatches.

Diva dramas should be old hat to the Berrys. Now the chief executive of EMI Recorded Music and Nancy's superior, the widely respected Ken Berry got his start in 1973 as a clerk in the accounts department of Virgin Records, where he attracted the attention of founder Richard Branson. Branson sent Berry to New York in the late '70s to establish an American beachhead for Virgin, and it was there that Berry met the young Nancy Myers, who was peddling demo tapes for Detroit rock bands. Berry brought her into the company, and they eventually married in 1985. By the early '90s Nancy was overseeing ad and promotional campaigns for Virgin's biggest stars, including Janet Jackson and George Michael. The couple signed the Spice Girls after hearing the group perform for them with a boom box at their Los Angeles home. Today Nancy oversees Virgin's global marketing and works closely with bands on all aspects of production, from album covers to videos. Critics have dismissed her as a well-connected groupie, saying she lavishes attention only on big-ticket stars. Some of those stars have only praise for her. "I've had nothing but unqualified support," says David Bowie.

Her biggest challenge may be turning Mariah Carey into a Virgin cash cow. Virgin has a history of paying top dollar for artists who many thought were on the decline, spending $80 million for Jackson in 1996 and $42 million for the Rolling Stones in 1991. Both of those deals proved to be profit home runs. In signing 31-year-old Carey to a four-record deal this April, Virgin bid her away from Sony, where she still owed another record. "It was a huge roll of the dice," says analyst Michael Nathanson of Sanford C. Bernstein &Co. He said most record companies don't let artists leave if they think they can still record profitable hits. Others, though, say Carey was eager to leave, as ex-husband Tommy Mottola is a senior Sony executive. Carey's new album is the soundtrack from her first starring role in a Hollywood movie, set to debut Aug. 31. Because of her hospitalization, Carey won't be available to do early promotion for the movie or, more important for her album, to immediately record a second music video. Twentieth Century Fox has not decided whether it will postpone "Glitter" or release it as planned.

The Carey recording that is getting unwanted attention is not on any album. In the hours before she was hospitalized, Carey told fans through her Internet site, "All I really want is to just be me and that's what I should have done in the first place... I don't say this much but guess what, I don't take care of myself." She also left a note for Nancy Berry: "I can't reach Nancy, but I'd like to say to her: I will record and stuff. It's just that I needed some time off but nobody was really giving it to me." For Carey's sake as well as its own, Virgin is certainly hoping she gets well soon.