Online Extra: P. Diddy Sees Bling in Ring

The hip-hop star explains why he's moving into wireless service and how he expects to making money from music downloads

Sean "P. Diddy" Combs is no dummy. He's an award-winning musical artist. A hip-hop mogul. The CEO of Bad Boy Entertainment Group. And soon (drum roll, please) a wireless-service provider. On Mar. 14, at the cellular industry's annual confab in New Orleans, Combs boldly declared that he is an MVNO, wireless jargon for mobile virtual network operator.

"I don't have the spectrum, I don't own the network infrastructure, I don't make customer-service calls, but I do have subscribers. I have tens of millions of them," he told execs abuzz over his declaration. His subscribers, he added, spend billions of dollars every year on all sorts of items -- but mainly music.

Combs's timing couldn't be better: The wireless industry is gearing up to zap all sorts of tunes to cell phones. "I'm a future wireless mogul," he told BusinessWeek Chicago Deputy Manager Roger O. Crockett in a phone interview. "All of this big talk -- it has to come to fruition by me." Here are edited excerpts of his comments about the potential and pitfalls of music in the wireless world:

Q: How big of a movement do you think wireless downloads will be?


The iPod has helped digital music take off. Now people are talking about the cell phone as a platform for digital music. Music is...going to be the leader in the future of wireless.

Just imagine a world without music. If I want to hear Pink Floyd's classic hits, I want to be able to pay to get it now. The positiveness is the urgency. Sometimes when I want it and I need to have it, there should be a way.

Q: Will the ability to download music over the airwaves help the music industry recover from its doldrums?


There has been a true perception that the record industry is down because of the lack of sales in CDs, but the music industry [overall] is booming. People want to own music, they are thirsty for it. It's a way to express themselves and their personality. They want it in any capacity, and they want it now. A majority of people have music going on in their lives every day.

Q: What's up with so many people becoming so interested in carrying an iPod or other device that plays their music?


It's expressing a certain style of your life. It's like driving a Mercedes or a classic Harley rather than any ol' ride. When you have the new black Razr [phone by Motorola] in your hand, that new Razr is not just your phone, it's saying you are a new level of person.

Q: How do you expect to participate in the wireless music business?


[My wireless service] would be targeted to the youth market and would specialize in a cool lifestyle. It would be something that would be my own MVNO [mobile virtual network operator], and the actual design of the handset would be something that is unique.

In time to come you'll see myself and my company involved in an entity that gives a community access to certain content and has certain marketing power to market to this community.

Q: Could there be a P. Diddy phone soon, or a Bad Boy online music store for mobile downloads?


Hey, man, I can't tell you all my secrets. But we understand the value of the industry in this space. We have a community. And where this wireless space is going is a full-fledged lifestyle network. I'm a creator of music content, and I have a catalogue of music that is an expression of this community and these times.

Q: Downloading music from the Net costs about $1 per song. Do you think it should be more for sending music to phones?


Oh, yeah. One dollar for a single doesn't make sense. The record industry pays the cost of the CD and the cost of the manufacturing. But the record industry has been scared to death that [piracy would dominate] and they wouldn't get anything, so they decided to take some money rather than get no money.

I can understand when we were happy to get a dollar, but as the technology catches up and as the wireless business catches up to tech, I hope things will even out. [Charging more] is not in any way to overcharge the customer. It's just to do whatever is fair.

Q: How are you paid for PC downloads now, and how do you expect get paid from the cellular download model?


The music industry is coming around to really realize its worth. So you're going to see the evolution of us realizing our power and not giving our content away. The entities that touch the pulse of culture are going to get fair market value. I'm going to be a leader in determining what my value is in this space.

Q: So what is that value? When music is downloaded to phones what should the music studio's cut be, 50%?


It definitely should not be 50-50! We should get the majority of it because we control the music. About 90% should go our way. But it shouldn't be about the money, it should be about servicing the customer. There are deals in the future that are going to be a blueprint for all the deals that are going to fall under them. We have an industry that is starting to smarten up, and we can take advantage of the success of the wireless space.

Q: It looks like most of the wireless carriers won't let people move music from their phone to other devices right away. Do you think that's going to turn people off?


In the future, they will have to focus on technology to let people share. But as it's shared, people should have to pay for it. It will happen. It takes time, but everything is moving faster than it was two years ago. Eventually the technology catches up to the dream.

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