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The Year the Bubble Burst: How 2001 Mega Contracts For Whitney Houston and Mariah Carey Signaled a Shift in the Music Business

Here, we take a look at a moment in time when recording industry optimism failed to match with business reality, resulting in two quickly disastrous superstar mega-contracts being handed out.

This week, Billboard is publishing a series of lists and articles celebrating the music of 20 years ago. Here, we take a look at a moment in time when recording industry optimism failed to match with business reality, resulting in two quickly disastrous superstar mega-contracts being handed out — a sobering moment for the major labels that remains worth remembering decades later. 

The back half of the ‘90s in entertainment was a bit like being at a party with top shelf open bar, a full buffet, and a car service waiting outside to take you home when ready — an SUV. There was a lot of money to go around; video costs were hitting indie movie budget levels, former Disney Channel stars were taking over pop music en masse, hip-hop was growing from a niche art form into a blinged-out business spawning fashion lines and restaurants, AOL and Time Warner were planning world domination, the dot com industry was printing money, and albums were flying off the shelves at a pace that would seemingly never slow down. 

But then, everything slowed down: The year 2000 brought new peaks for music and media, followed by an immediate downturn. The dot com bubble burst, the AOL Time Warner merger was a disaster, and the music industry hit a Titanic-esque iceberg called file sharing — but refused to turn the ship in time, because they didn’t think things were that bad. By 2001, the music business was at the beginning of a decade-long decline, in which sales revenue would drop by half before streaming started slowly moving the needle back into the positive (global revenue didn’t start growing year over year again until 2015). 

In the year or so it took the industry to admit file-sharing wasn’t a problem that could simply be sued away, some labels found themselves additionally hindered by business practices based on the heyday of the late 1990s. And executives can’t really be faulted for that: of the 115 certified Diamond albums (10 million or more units sold) in RIAA history, at least 46 were released between 1990 and 1999 (in fairness, a significant number of them belong to Garth Brooks). Of those, 26 are from the years 1995 to 1999, and were certified Diamond in just a few years. In comparison, there’ve been less than 20 Diamond albums released since 2000 total, and only two studio releases since 2010 — both by Adele.


These numbers in mind, it’s not surprising that labels were pursuing landmark deals for established artists at the top of the ’00s — especially if said artists had a few of those 46 Diamond plaques gracing their walls, as was the case with both Mariah Carey and Whitney Houston. The two singers, who at the time were two of the best-selling, most-awarded women in music with 26 Billboard Hot 100 No. 1 hits and worldwide sales well into the nine figures between them, both signed new recording contracts worth upwards of $100 million in 2001. 

The labels, Virgin Records and Arista Records respectively, were both in transition, and willing to shell out the high price because talent of Mariah and Whitney’s caliber would secure both their brand legitimacy and market share. But both deals had the incredibly poor fortune of happening at tipping points both for the business, and in the personal lives of these two entertainers — and the companies were left holding the metaphorical bag, serving as cautionary tales for the future.

In 2000, Mariah Carey was going through the second of two highly public splits: the first, her divorce from husband and Sony Music head Tommy Mottola in 1998; second, the split from Sony Music itself as her contract neared its close. Carey wasn’t shy about the fact that she had no intention of reupping with her label home of a decade, citing an acrimonious decline in working conditions post-split from Mottola. She bought out her last album for $7 million, and companies launched into a full-scale bidding war for the free agent. Carey was a prime commodity, having logged at least one Hot 100 No. 1 each year since she debuted, and coming off a strong showing with 1999’s Rainbow, which garnered her best first-week sales to date and was certified triple platinum within a month. 

Because she’d spent her career to date feeling her voice and input were limited, Carey was asking for terms that many labels simply weren’t able to meet. EMI Group, Virgin’s parent company, had fallen to the bottom position of the Big Four music companies behind Sony, Universal and Warner. After a merger with AOL Time Warner fell through, they wanted to increase their curb appeal for remaining potential buyers — and Mariah was a perfect choice. In April 2001, the label announced a four-album, $80 million deal with Carey — including a $21 million advance, reimbursement of her Sony buyout, a 25% royalty rate, and full creative control. 


It was a sweet deal for Carey, but not as seemingly risky a venture for Virgin as it feels now; Carey averaged six million in RIAA-certified sales per album, and her first film role — in a movie loosely based on her own rise to stardom — was on the horizon. But seven studio albums in 10 years (basically her entire adult life), plus the public spectacle of her marriage and divorce, had taken their toll on the artist. By Summer of 2001, Carey was publicly exhibiting strain during promotion for Glitter, most notably with an uncomfortable appearance on MTV’s TRL where Carey crashed the set with an ice cream cart, did an impromptu striptease, and went on a discordant rant about therapy, prompting host Carson Daly to remark, on camera, “Ladies and gentlemen, Mariah Carey has lost her mind.”

Shortly after, Carey checked herself into a rehab facility, and her rep announced she’d experienced a breakdown, brought on by exhaustion. Carey’s recovery delayed the Glitter film and soundtrack release, and the LP was pushed to the unfortunate date of Sept. 11, 2001. With limited previous promotion; alleged manipulation from Mottolla as retaliation for Carey leaving Sony, including rushing J. Lo’s “I’m Real” out ahead of Glitter’s lead single “Loverboy,” which featured the same sample; the added shadow of a national tragedy all but guaranteed the album’s failure. (The movie was also a commercial and critical disappointment, grossing just over $5 million in box office receipts and drawing roundly negative reviews.)

At the same time, EMI Group announced a new chairman for their music division, Alain Levy, brought in to stop the label’s eroding profit margin. As part of his house cleaning, he fired the executives who brokered the Carey deal, then terminated the contract before it was even a year old. Virgin’s price to make the break quick and smooth was $28 million dollars, on top of the $21 million advance Carey had already received at signing. So Carey walked away with over half the contract value with just one under-promoted album. 

From the vantage point of 2021, knowing how the rest of Mariah’s career has played out, EMI pulled the cord too fast, and the industry press were too quick to write Carey off — walking away with nearly $50 million of an $80 million contract free and clear to sign somewhere else immediately doesn’t exactly sound like a death knell. Even in a rapidly changing landscape, an artist of Carey’s track record could afford one bomb before abandoning the partnership – especially when ending the relationship costs $28 million. (It’s also worth noting that even with a “failed” record, Carey still had the highest selling single of 2001 with “Loverboy.”) 

Carey’s next contract, signed later in 2002 with Island/Def Jam, was valued around a much more modest $20M for three albums through her own imprint. The second album in that deal, 2005’s The Emancipation of Mimi, returned Mariah to the top of the charts, and added another Billboard feat to her accolades, as “We Belong Together” ended up the longest-reigning Hot 100 No. 1 single of the 21st century to that point with its 14-week run on top. 


While EMI may have been too hasty in cutting their losses with Carey, Arista Records may not have exercised enough prudence extending their relationship with flagship artist Whitney Houston. Around the same time Carey announced she was checking into rehab at the top of August 2001, Arista Records confirmed they’d renewed Houston’s contract for $100 million, touted as possibly the biggest recording contract to date at the time. When Houston’s mentor Clive Davis was ousted from Arista and started his new venture, J Records, there was great speculation on whether Houston, the biggest act on Arista’s roster, would follow. Instead, Whitney committed to the new L.A. Reid-helmed regime with an agreement for six studio albums and two greatest hits compilations (she still owed several albums under her existing contract), with a $25 million advance. 

Houston was expected to go into the studio almost immediately — but instead of continuing the momentum of 1998’s multi-platinum My Love Is Your Love and 2000’s multi-platinum greatest hits compilation, Whitney was on the precipice of the painfully public downward spiral that would tragically end with her overdose in 2012. 

Erratic behavior from mega-stars wasn’t a new or novel thing, and Houston had been making both tabloid and regular news for years with then-husband Bobby Brown. But a new pattern was emerging by 2001; Whitney had canceled some domestic dates during her 1999 My Love Is Your Love World Tour, including a show in her hometown of Newark after concert goers were already in seats, raising concerns anew about her health. There was also speculation about the state of her voice, as the singer, known to be careless about protecting her instrument, increasingly failed to hit the big notes in signature ballads like “I Will Always Love You.” In early 2000, she skipped a performance for Clive Davis’ Rock and Roll Hall of Fame induction ceremony, and later in the month pulled out of a performance for the Oscars telecast. On both occasions she canceled with only a day’s notice, citing ongoing throat issues, but rumors persisted in the wake of public drug dustups with both her and Brown. 

Still, Reid was facing enormous pressure stepping into Clive’s forcefully vacated seat, and retaining Houston was an important strategic move to start his tenure — so perhaps these incidents weren’t concerning enough to weigh into negotiations. But Arista’s parent company BMG Entertainment was reportedly forecasting a $150 million loss for 2001, so it wasn’t without risk. And by September, Houston was increasingly in headlines for things that had nothing to do with her music: The star’s incredibly gaunt appearance at the first of two live concerts celebrating Michael Jackson’s solo career sent fans and outlets into a tizzy. When she was a no-show for the second tribute on September 10th, rumors broke that the singer had succumbed to an overdose. Her publicist and Arista execs made it clear Houston was still very much alive, and fortunately the story was overshadowed when the world’s news cycle shifted significantly on the morning of September 11th. 


Houston’s first album under Reid, Just Whitney, changed release dates multiple times, finally bowing in December 2002. The LP generated Houston’s highest first-week sales, but didn’t spawn any major hits and was only a modest seller altogether. Speculation about her well-being and viability only grew as she promoted the project: An infamous sit down with Diane Sawyer around the album’s release, meant to be Whitney’s redemption moment, only raised eyebrows further as the singer proclaimed, among other things, that she never did crack because it was too cheap: “I make too much money to ever smoke crack. Let’s get that straight, OK? We don’t do crack. We don’t do that. Crack is whack.” 

Houston’s public descent continued even as the singer moved to GA in hopes of a quieter life for her family, but she and Brown were tabloid and blog staples by then — generating news as they traveled, as Brown was incarcerated, and then, explosively, when they allowed cameras to follow them for Bravo’s single 2005 season of Being Bobby Brown, in which any remaining facade of the polished pop princess Davis had cultivated for Houston over the years was completely wiped away. In 2006, she entered rehab, filed for divorce and started working with a vocal coach to rebuild her voice — but it would be 2009 before she released another studio album. 

By that point, Reid had long since been removed from the helm of the label, in part due to disappointing returns on big signings like Houston and Boyz II Men, whom Reid brought to Arista in the wake of their lowest career sales, and resulted in only one lukewarm album with the label. The warmly received  I Look to You, which topped Houston’s previous first-week sales with a No. 1 debut, brought Whitney back to the sweeping ballads and catchy dance hits fans loved her for. The platinum-certified LP was also her final release, and speculation suggests Houston’s estate still owes money to Sony – since Houston wasn’t a songwriter, her posthumous catalogue didn’t generate the same revenue for the artist’s estate as, say, Michel Jackson. 


As the music industry adjusted to the rapid changes of the digital landscape, numbers like $80 million and $100 million didn’t go away; they were still rare, but were now attached to 360 deals and joint ventures. Just months after buying Carey out in 2002, EMI renegotiated the contract of U.K. mega-star Robbie Williams for $125 million. However, they crafted a smarter deal for the declining sales market with precursor to what was soon to become a standard 360 structure, providing the company a portion of Williams’ touring and merchandise. It also included a smaller advance, at only $10 million. In 2008, concert promoter Live Nation expanded its business to recorded music and lured major acts including Jay Z, Madonna and Shakira away from major labels altogether with $100 million-plus deals encompassing touring, merchandise and recording, while also making the artists partners, giving them more control. Now, labels and top-selling artists are still figuring out the balance of risk and control between the two entities.

Fifteen years after Whitney and Mariah’s headline generating deals, Adele was the first living artist to best Whitney’s $100 million contract with a major when she renegotiated with Columbia Records for $130 million in 2016 (Michael Jackson’s estate signed a deal reportedly worth north of $200 million). In this case, the move seems prudent on Columbia and SONY’s part; Adele had the top two selling albums of the last decade, and was the only artist to hit the Diamond sales mark with releases in the last decade; she is a recording unicorn. 

The music industry has enjoyed streaming-abetted double-digit growth for four consecutive years now, so once-in-a-lifetime artists like Adele seem like a safe gamble. But just as companies were ready to celebrate a return to the salad days, the COVID pandemic brought the live entertainment and touring industries to a halt right at the beginning of the beginning of the 2020 festival and tour season, reminding us that some aspects of the business are forever unpredictable. No matter how promising the landscape, the failure of Carey and Houston’s deals, created at a time when they were among the biggest recording stars in the world, should remain a caution against such enthusiastic over-betting.