Why Celebrities are Wrong to Renegotiate Contracts
The fine line between terms and greed
The fine line between terms and greed
Jon Heder was only paid $1,000 for his starring role in the movie Napolean Dynamite. It was made on a tight, almost unheard of budget of $400,000 and debuted at Sundance film festival as an independent film.
Fox studios bought the rights to the movie and it went on to make over $46millon — gaining a massive cult following.
Heder, crushed by the success of the movie tried to renegotiate his contract after the fact. Even though the movie created countless opportunities for Heder in Hollywood, he was angry for not getting a cut of such huge profits.
The studio, fearful of public backlash, agreed to pay Heder and renegotiated his active contract. Let me explain why this was a mistake…
You have 10 apples
You have 10 apples. Joey has 4, so you sign a contract to give Joey 3 apples in exchange for a hug — because you’re kind. Now you both have 7, but Joey goes on to sell his apples for $70,000.
Does he now owe you $30,000?
Were you wronged?
Or, now that it’s worth more, did you undervalue your product and give it away at a price you’re no longer happy with?
Those apples could have equally become worthless, rotting apples.
This preschool-friendly example explains the ludicrous concept of renegotiating an active contract based on the success of the resulting product.
If you ended up feeling wronged by Joey in the example above, you’ve failed to understand the concept of risk in business.
This happens all too often
Look at the recent drama over the ‘Call Her Daddy’ podcast. Their contracts were still active for another year, but they went public out of pure greed… and it backfired massively.
While researching this post, I found countless other examples from celebrities, CEO’s and Reddit users, who have famously applied pressure on businesses to renegotiate their active contracts based on the success of something good they did at work.
Not one of them mentioned the projects they’d been a part of, that had unfortunately made losses. I wonder why?
In each example, all parties overvalued themselves and their contribution to the winning product without understanding the initial risk. Let me explain…
Contracts 101: Your contract is your contract
To understand poor pay for products that gross huge sums of money, you need to understand the concept of risk in business.
Not every product is a winner.
The wins absorb the losses and the hope is, as a business, you statistically have more wins than losses each year. Voilà, that's profit.
With each new venture, the business as a whole takes a risk. For that risk, they’re prepared to stake some of their own money, not your money, theirs — as payment/salary to the people who helped create that product on behalf of said business.
If that product fails, 100% of the ownership and financial implications for that failure falls on the business. So if that product is a huge success, 100% of the ownership and financial success falls to the business.
It’s simple. You can’t renegotiate active contracts based on the success of a risk that could have equally failed. That’s naive… and greedy.
If terms have been broken, or the contract has expired, then it’s worth renegotiating more compensation based on your self-evaluation of increased worth. That’s acceptable.
However, when contracts are still active and you’ve willingly undervalued yourself, or been associated with a bigger hit than expected, you can’t hold your hand out and expect more from the people that took the risk.
You know the terms when you signed, so if you’re ever likely to feel exploited if that venture becomes a success, then just don’t sign in the first place.
Honestly, the only thing worse than a bad deal is someone who complains about a good one.