P. Diddy's new artists give Warner Music urban edge

08/31/2006 2:47 PM, Reuters
Jeffrey Goldfarb

When Warner Music Group created a record label with Sean 'P. Diddy' Combs last year, industry insiders said the company was taking a big risk with a star who may have lost his hit-making touch.

They questioned whether Combs' Bad Boy Entertainment could deliver a consistent string of hits after a disappointing partnership with Vivendi's Universal Music Group. Despite a big show biz profile, Combs had not ruled the charts since the late 1990s.

Now, 16 months later, Warner Music and Combs seem set to prove the critics wrong. Girl band Danity Kane's debut album entered at No. 1 on the charts this week -- the third major hit from a debut artist under the Bad Boy label in as many months.

"These days it's so hard to break a new artist. People don't really like giving new artists a chance," Combs told Reuters this week. The hip-hop impresario and fashion designer said Bad Boy's success had caught him "totally off-guard."

The rap star said he had faced a "huge amount of pressure" in going into business with a publicly listed company -- the $60 million joint venture Bad Boy Records was announced in April 2005, just weeks before Warner's initial public offering.

"A lot of people were telling me it's difficult because I had left music for a minute and got a little unfocused," he said, referring to his fashion line Sean John and other businesses.

"But I like working that way, I like being judged on performance and being paid on performance," he said.

Warner, the fourth-largest music company, told Reuters its partnership with Combs has exceeded expectations in developing new acts. The arrangement is helping to boost a former weak spot: hip-hop and R&B music.

"It was something they needed at the time of their IPO -- a larger presence in their urban music portfolio," said Eric Handler, an analyst at Lehman Bros. "Bad Boy got off to a shaky start, but all of a sudden things are really starting to pick up there."

NEW MEDIA

Combs said Warner, which has been leading the major record companies in experimenting with new business models, was keen to market Bad Boy's artists through new media channels such as the Internet and mobile phones.

The latest album sales data from Nielsen SoundScan on Wednesday showed that Danity Kane had sold 234,000 copies of its self-titled debut album, pushing Sony BMG's established act, OutKast, to the No. 2 slot.

The girl band, distributed on Bad Boy Records through Warner's Atlantic Records, was created on the P. Diddy-fronted MTV reality show "Making The Band 3."

It was the third hit from the Bad Boy label after Southern rapper Yung Joc in June and Cassie, a favorite on online teen hangout MySpace.com, earlier this month.

"Our expectation when we did the deal with Bad Boy was to break one new artist every 18 months and to reintroduce P. Diddy," said Warner Music Executive Vice President Kevin Liles this week. "He's broken three new artists this year so it's over our expectation, but still under what we know he can do."

Warner Music does not break down revenue from its various labels, but SoundScan sales data show that the company's labels collectively accounted for an 18.7 percent share of the urban music sector in the year to date. In 2005, their share of that market was 13.8 percent.

While Combs cannot claim all the credit for Warner's resurgence in the hip-hop/R&B genre, analysts said Bad Boy was having a halo effect on other labels within the Warner group.

"A joint venture, if successful, can bring the intangibles of more awareness and talent," said Bishop Sheen, an analyst at Wachovia Securities.