He’s No. 1, 2, 3 and Fancy-Free

Jimmy Iovine, head of Vivendi Universal’s Interscope Group, is riding high this week, with the nation’s three bestselling albums.

Now the smart money is asking: Will his next trick be to change horses?

For months, industry insiders have been watching for a sign that Iovine -- among the record world’s most highly regarded executives -- is ready to bolt when his contract with Interscope expires in January.

Any such move would jolt the French media giant as it struggles to sell and reorder entertainment assets and might set off an industrywide executive shuffle.

Preoccupied with the anticipated sale of their massive movie and TV operations, Vivendi Universal brass have yet to reach a new agreement with the Interscope chief, despite talks that are widely believed to have included a proposal under which he would receive a stake in the label.

People familiar with the talks say the French company has found it difficult to make a rich new deal with even an executive as well-regarded as Iovine at a time when record sales are plunging worldwide.

Vivendi Universal executives declined to comment on the discussions.

And Iovine said only: “It isn’t like they haven’t made me an offer.... I’m going to do everything I can to stay here. I love Interscope. I care about this company and our artists and employees.”

But competitors already are positioning for a shot at an executive who has defied industry weakness by spinning hits from artists such as Dr. Dre, Eminem, 50 Cent, No Doubt, U2 and Tupac Shakur.

“Jimmy is the hottest record executive in America with the shortest time on his contract. That’s a hand with four aces,” said entertainment impresario David Geffen, who years ago sold Universal one of the record operations now overseen by Iovine.

Geffen believes it unlikely that Iovine will leave. But if he does: “All the stars are aligned in Jimmy’s favor. He’ll not only land on his feet, but surrounded by roses.”

At the moment, Iovine dominates the record charts with top-selling albums from shock pop star Marilyn Manson, rapper 50 Cent and rock band Cold -- acts released by Interscope and its affiliated Geffen and Shady/Aftermath labels. Interscope is the only company to hold the top three slots on the pop chart twice in the last 13 years, according to Nielsen SoundScan.

For the last two years, Interscope has been the nation’s top seller of new releases -- including this year’s biggest, 50 Cent’s “Get Rich or Die Tryin’,” which has sold nearly 5 million copies. This week, Interscope cornered about 11% of U.S. current-album sales -- nearly double of any other label in Vivendi’s Universal Music Group, the world’s largest record company.

Iovine, 50, broke into the music business three decades ago, engineering or producing hit records for John Lennon, Bruce Springsteen, Tom Petty and Patti Smith. Iovine went on to transform Santa Monica-based Interscope -- which launched in late 1990 as a joint venture with Time Warner -- from a gangsta rap label into a full-service company with mainstream acts.

In recent months, Iovine took a major role in pushing the industry to become involved with Apple Computer Inc.’s new iTunes digital music service.

“We all know that Napster and Kazaa hit the music industry like a tsunami,” Apple Chairman Steve Jobs said. “But Jimmy was one of the first music guys to understand that, if harnessed, the Internet could turn out to be the best thing that ever happened to the business.”

Vivendi Universal now finds itself in the touchy position of having to negotiate new terms not just with Iovine but with another star executive, Lyor Cohen, the Island Def Jam chief whose contract also is expiring. An exit by both would tear a hole in the company’s creative ranks if key executives were to follow their leaders.

Iovine’s team includes talent scouts Ron Fair, who runs A&M;, and Jordan Schur, who heads Geffen. Schur is expected to take over MCA after Vivendi folds it into the Interscope Group.

The Interscope chief has particularly close relations with artists manager Paul Rosenberg and rap icons Eminem and Dr. Dre. Iovine’s connections with the latter helped him to sign 50 Cent to Interscope, along with his new label, G Unit. Those ties also helped deliver “8 Mile,” a hit film that Iovine co-produced for Universal last year.

Although declining to discuss the current talks, Iovine made clear that his expectations remained high, music business woes notwithstanding.

“This industry is at a crossroads,” he said. “What we don’t have anymore in this business is security. What we do have is opportunity. And only the companies who get that are going to win.”