Mr Fifield is understood to have been the favoured candidate among executive directors to take over the top job when Sir Colin moves into the role of non-executive chairman. But the powerful group of independent directors on the EMI board blocked the move.
It has also been confirmed that Sir Colin's decision to stay on as executive chairman is a short-term measure and that a successor as chief executive is expected to be named by June or July. The group is looking internally and externally for a new chief executive.
The group of non-executives who blocked Mr Fifield's promotion consists of Sir Peter Walters, non-executive chairman of SmithKline Beecham; Eric Nicoli, chief executive of United Biscuits; Sir Graham Day, former chairman of Rover, British Aerospace and PowerGen; Hugh Jenkins, formerly of the Prudential; and Dr Harald Einsmann, an executive director of Proctor and Gamble.
Although it had been suggested that the EMI board balked at the salary being demanded by Mr Fifield, senior internal sources rejected this.
"It wasn't so personal as that. The board decided it wanted someone with a wider scope and a broader menu of skills who had financial abilities required but also the strategic vision to see where the group has come from, where it is going and the technologies that will drive it," one insider said.
Suggestions that Mr Fifield's prospects of seizing the top job had been undermined by his closeness to Ken Berry, the president of EMI Recorded Music, were also discounted.
The Bel Air-based Mr Berry and his wife, Nancy, have been subject to unflattering coverage of their lifestyles and the power that the duo now wield within the EMI empire.
But one senior source dismissed reports that Sir Colin and the board were unhappy with Mr Berry as "horseshit". He added: "The board and Sir Colin believe Berry is doing what he is paid for and doing it well."
Stories about his wife's rock'n'roll lifestyle, including late-night parties at fashionable Los Angeles and New York clubs, and Mrs Berry's penchant for attending meetings barefooted and in short skirts, were dismissed as "a nasty little campaign".
City analysts have become concerned about what they perceive to be a power vacuum beneath Sir Colin Southgate at EMI. With Mr Fifield set to leave when his contract runs out next year and Ken Berry ruled out for the top job, there are no other credible internal candidates for the position of chief executive. An external search will take longer, leaving Sir Colin to fulfil his dual roles as chairman of EMI and head of the Royal Opera House.
EMI shares have performed dismally since it was demerged from the Thorn rental business in summer 1996. The shares have lost more than 25 per cent of their value since then. However, the stock bounced 22p to 540p yesterday as bid rumours resurfaced. Analysts say a predator could take advantage of EMI's management malaise and use it as an opportunity to strike. Seagram, Disney and Bertelsmann, the German music group, have all been mentioned as possible bidders.
EMI is set to become a more focused music group following its Waterstone's deal with WH Smith last week. Its HMV music and Dillons books businesses will be grouped into a separate company with Waterstone's. The new company, HMV Media, will be treated as an associate in EMI's accounts and floated within two years.