Combs, Universal Records Cut Deal

Unable to persuade a major record corporation to buy a chunk of his Bad Boy label, rap entrepreneur Sean “P. Diddy” Combs on Thursday settled for a distribution pact with Universal Records valued at more than $20 million, sources said.

Lucrative as it might seem, the deal is a far cry from the $100-million joint venture Combs began shopping last fall to industry captains. Sources said AOL Time Warner Inc.’s and Sony Corp.’s music units passed on the partnership offer but considered cutting a distribution pact with Combs before backing out.

Under the deal with Universal, a unit of Vivendi Universal, more than $5 million of the $20-million-plus advance will be paid to Bertelsmann Music Group to clear the balance sheet on its recently dissolved joint venture with Combs, sources said.

Combs launched Bad Boy in the early 1990s with great success as a partnership with the German media giant’s Arista division, but his label had been operating in the red for nearly two years, sources said.

Universal executives and Combs declined to comment on details of their deal.

Should Bad Boy rebound and exceed Universal’s sales projections in the severely depressed music market, the pact could be worth as much as $35 million to Combs over three years, sources said.

Under the deal, Universal also has agreed to market and promote Bad Boy CDs as well as distribute the products.

In August, Bertelsmann declined to renew its deal with Combs. In an unusual move, however, the company allowed him to exit with complete ownership of Bad Boy’s master recordings, which have spawned more than 30 million units sold over the last decade.

The Bad Boy roster includes such music acts as slain rapper Notorious B.I.G., Faith Evans, Carl Thomas, Dream, New Edition, Loon and P. Diddy himself.

Bad Boy will battle it out for market share with a host of other rap labels distributed by Universal, including Cash Money, No Limit and Blackground.