Music

How Legal Issues Can Tank a Music Catalog’s Valuation — Even If It Brings In Millions Each Year

Under normal circumstances, Sean “Diddy” Combs and R. Kelly would each own a valuable catalog of music rights, worth tens of millions of dollars apiece in a market of music investors hungry to purchase new prize assets. But because R. Kelly has been convicted of sex trafficking, sexual abuse and child pornography, while Combs is currently facing a reported federal sex trafficking investigation as well as several lawsuits alleging sexual assault, the only value each will likely get these days from those music assets is their annual income from sales and streams.

That’s because corporations and private-equity music asset investors would be wary of buying either catalog if they were put up for sale, music-asset investors and traders say.

As it is, Diddy owns his master recording catalog and his publishing — though they are under various identities, such as alter egos Puff Daddy, Diddy-Dirty Money and Love — which combined have generated about 147,000 album consumption units annually over the last three years. Billboard estimates that brings in about $2.4 million in master recording revenue, while the publishing from those recordings comes to about $600,000 annually. Combined, his share of that would come out to an estimated $2.625 million annually during that time period, which, if it attained a standard 16-times multiple, would work out to an estimated sale value of around $42 million. (For a detailed breakout on Combs, click here.)

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Comparatively, the activity on R. Kelly’s catalog is more than twice that of Diddy’s, at an average of 315,000 album consumption units annually over the last three years. Unlike Diddy, however, Kelly doesn’t own his recordings or publishing catalogs, sources tell Billboard — or at least the music he created through 2010. The music he issued up to 2010 comprised about 90% of his U.S. activity last year, while music he released after 2010 — in which he may have an ownership stake — only generated about 10% of his catalog’s overall activity. Consequently, unlike Combs, Kelly likely gets a master recording royalty calculated as a percentage of revenue for his master recordings. 

Billboard estimates that his catalog earned about $4.1 million in master recording revenue annually over the last three years, while the publishing revenue for songs on his albums comes out to about $2.3 million. Billboard further estimates his share of that is about $2.3 million, which if it obtained a 16-times multiple, could also reap in the neighborhood of $37 million. (For a detailed breakout on Kelly, click here.)

Combs’ representatives didn’t respond to a request for comment. A lawyer for Kelly disputed Billboard’s estimates, calling them “speculative,” and wouldn’t provide further information.

One major caveat: both artists have extensive credits and royalties for music assets far beyond their own catalogs. In recent public interviews, Combs has said he owns the catalog of his longtime label Bad Boy Records, and he also has extensive producer credits and collaborations with other artists; R. Kelly not only has his own extensive record of productions and collaborations with other artists, but worked for years as an outside songwriter as well. (Diddy also recently sold his shares in media company REVOLT.) These other assets for both Combs and Kelly likely retain their value, even if the two artists’ own catalogs — at least for the near future — are considered undesirable assets.

Last year, Diddy told Billboard that he had received several offers to sell his catalog during the catalog gold rush of the pandemic, but had turned them down. Now, one key music asset buyer says, “We wouldn’t buy it for reputational reasons, but also because our investors wouldn’t want to be associated with such an acquisition.” Even if offered at a discount, the executive continues, “Zero chance, at no price.”

The same goes for R. Kelly. An executive says he was offered a chance to look at the Kelly catalog a few years ago by a representative of the artist who was shopping the assets; he turned down that opportunity then for the same reason, even though the artist had at that point yet to be convicted.

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Various allegations against Kelly have been around for well over a decade, and he was acquitted on child pornography charges in 2008. Then in 2019, a documentary called Surviving R. Kelly was released that rehashed many of the old allegations against the artist and revealed a stream of new allegations and new investigations, all culminating in multiple indictments for sexual abuse. In 2021 he was convicted in New York and sentenced the following year to 30 years in prison; in 2023, he was convicted on child pornography charges in Chicago and sentenced to 20 years in prison. Nineteen of those years from the two sentences will be served concurrently, according to press reports.

Another big music-asset buyer agrees with the first investment executive, saying, “Our investors have a fiduciary responsibility. You wouldn’t get a potential acquisition like Diddy’s or Kelly’s past an investment board.”

Even if Diddy were never charged or convicted, the second music-asset buyer says the market for the catalog doesn’t exist. “Nope, he’s done,” the person says. “He’s got too many weird allegations against him.”

Not everyone agrees with the assessment that Diddy’s catalog is now undesirable, however. A third music-asset investor urges caution: “Not so fast,” the person says. “You can’t lump Combs into a Bill Cosby category.” (Diddy, while reportedly under investigation, has not been indicted, let alone convicted. Cosby’s conviction was also ultimately overturned.)

That investor acknowledges that most institutional and corporate investors won’t touch the Diddy catalog right now, but that doesn’t mean they won’t consider it if circumstances change. “The FBI have raided plenty of places and many times no one is ever charged,” that executive says. “Let’s see if Combs gets indicted.” (Those comments were made before CNN published a video from 2016 that appeared to show Diddy assaulting his ex-girlfriend Cassie Ventura.)

As all investors and traders tell Billboard, corporations and institutional investors won’t touch catalogs that carry the type of baggage and stigma that Kelly’s catalog — and now maybe Diddy’s catalog, too — come with. Prior to the Surviving R. Kelly doc and the subsequent legal cases, Kelly’s U.S. radio presence averaged nearly 120,000 plays per year between 2015 and 2018. From 2019 onward, his radio plays have averaged fewer than 5,000 spins a year. Likewise, Diddy’s radio play plummeted by 88% since Cassie filed a lawsuit in November 2023 alleging abuse and rape, which was settled.

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Similarly, music investors predict that whatever synchronization revenue the catalogs once enjoyed, is likely to slow or dry up completely for Diddy, and probably already has for Kelly.

But the fans of the artists will continue to enjoy their music regardless, investors say.

Between 2021 and 2023, Kelly’s U.S. on-demand streams averaged 472 million annually; in fact, in 2018 — when the Time’s Up movement launched the Mute R. Kelly campaign — and in 2019, when Surviving R. Kelly preceded the stream of troublesome news reports on new revelations and developments toward what would eventually be an indictment, Kelly’s streams jumped to 733 million and 809 million, respectively, before falling back down to 496 million in 2020.

Meanwhile, Diddy’s streams have fallen off slightly; in the first quarter of this year they totaled 51.9 million, down from almost 61 million over the same period last year, or a decline of 14.9%, Billboard estimates based on Luminate’s stream counts combined for his five main catalogs.

But it’s the royalties from songs recorded by artists that both Diddy and Kelly have produced and written for that could be worth selling, because they would likely land interested buyers, sources say.

In Kelly’s case, that includes music by Aaliyah, Sparkle, the Isley Brothers, Billy Ocean, Janet Jackson, Toni Braxton, Maxwell, Michael Jackson, B2K, Britney Spears, Whitney Houston, Jennifer Hudson, Jordin Sparks, Bryson Tiller and Celine Dion, among others. For Diddy, that includes music from Jodeci, Mary J. Blige, The Notorious B.I.G., TLC, Faith Evans, New Edition, Boyz II Men, Mariah Carey, Busta Rhymes, LL Cool J, Ma$e and Jennifer Lopez, among others.

“The other artists they have worked with have nothing to do with the bad actions on [Kelly and Diddy’s] parts,” says one music asset buyer. “Those other music assets have value.”

Additional reporting by Elizabeth Dilts Marshall and Bill Donahue.

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