SHARING AMERICA'S TECH NEWS FROM THE VALLEY TO THE ALLEY
“You started learning how to count right, I see,” explained Sean “Diddy” Combs to FORBES earlier today, likely referring to our latest estimate that placed his net worth at $580 million. “Thank God!”
But he was calling from France to talk about something else—a venture that could one day make him a billionaire—Revolt TV. Diddy is the network’s majority shareholder, and just announced a carriage deal with Time Warner Cable TWC -2.03%. That means his network will have over 25 million subscribers when it debuts this fall, he says, the biggest launch in history behind only Oprah Winfrey’s OWN and perhaps one other.
“Revolt is the first network that’s being launched in the social medial age,” he said. “Multi-screen, multi platform, from mobile to digital.”
So will Revolt make Diddy a billionaire? Perhaps not immediately, but there’s a good chance down the line. Cable networks are notoriously difficult to launch. The field is crowded, and established players don’t like ceding ground to newcomers. But Diddy seems to have found a way. In February 2012, Comcast CMCSA -3.23% agreed to distribute Revolt–along with three other minority-owned independent networks—to the 10 million homes it reaches. The Time Warner TWX -2.66% deal should push Revolt past the 20 million threshold. And if Diddy can indeed hit 25 million, he’ll have more than a quarter of MTV MTV’s audience.
Once in the door, the economics of cable television can be extremely favorable to network owners. SNL Kagan estimates that cable companies pay MTV $0.43 per month per subscriber, which works out to just over $5 per year, or about $500 million in annual revenues. And Diddy is more than happy to challenge the original music network.
“Since MTV stopped playing music videos … it’s left this gaping hole and an opportunity to create not just a network or a channel but an audience company,” he said. “That’s what I like to call Revolt: an audience company that specializes in Millennials. And the number one thing that Millennials like is music, and the number one thing I specialize in is music.”
Turning a profit may prove difficult in the early going, but a well-oiled network can generate margins in excess of 25%. So, some back-of-the-envelope math: say Revolt manages $4 per subscriber per year. That works out to $100 million in sales, and perhaps $25 million in profit. Apply a 15x earnings multiple, and you get a valuation of $375 million for the network.
Diddy wouldn’t disclose the precise nature of his stake, saying only that it was more than half. Even if it’s 51%, he’s looking at a potential net worth bump of nearly $200 million on paper when Revolt goes live. If he doubles his subscriber base over the next few years, the math says he’ll be a billionaire. A tall order, to be sure, but that’s Diddy’s specialty.
“All I try to do is build the maximum value for my companies,” he explained. “At the end of the day, the numbers don’t lie. I’m just like any other businessman; at the end of the year I have to get my report card and deal with the reality of whatever it is.”
As for the possibility of sending his net worth into ten-figure territory?
“I don’t want my career to be defined on this, that I was quote-unquote a billionaire,” he said. “But to be honest, I’d be blessed to be a billionaire … hopefully someday it’ll come true and I’ll be able to do some good with it.”
Additional reporting by Charlie Ambler