Production Company's $200M Exit

Rob Dyrdek shares the story of selling his production company and explains the challenging economics of the TV production business.

"I sold my production company for $200 million, and recently had an offer on the table that fell apart for $400 million. It's the worst business you could ever get into, and I'll explain why.

It's a 'shoot what you kill' game and the distributors control all the money. You have a hit show and flourishing production company, then the show gets canceled and your company's worth zero.

I have a 5-year, 1,680 episode order of television - unprecedented in all of production. But it's hard for me to turn around and sell that because it's one single show.

To build a production company, you need infrastructure for camera equipment, finishing equipment, music licensing. You get a budget from a network, maybe $500 for an episode, and have to figure out how to pull 20-30% margin. The only way to do that is vertically integrating.

Take Jeff Tremaine, an executive producer on my show - he makes $1 million off Ridiculousness just from his producer fee. We rolled in our executive producer fees, built out the post-production and music division to push margins up to create a sellable asset.

When you sell the business, you're trading at 5-6 times EBITDA. Now they won't even buy you outright - they partner with you, incentivize long-term earnouts because they don't want to pay you then have the show go away.

The gatekeepers are the distributors - Netflix, Paramount. You can try creating your own platform but it's expensive and difficult to build audiences. You're really looking at those distributors as gatekeepers to determine if you're worth purchasing."