Why Do Entertainers Make So Much Money

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Celebrities: Why Do They Get So Much Money?

This article is more than 10 years old.

It's easy enough to show that celebrities get lots of money. This very magazine creates a list each year of how many tens of millions people get for being able to sing, dance or talk to a TV camera. The much more interesting question is why do they get so much money?

A couple of pointers from the UK on this subject:

Adebayor's £165,000-a-week wages are frightening potential buyers away, while interested parties such as Zenit St Petersburg and Paris St Germain have been rebuffed by the Togolese forward, who cost £25 million on arrival from Arsenal two years ago.

Similarly, there are few takers for Bellamy and Bridge, beneficiaries of the inflated salaries signed off during Mark Hughes's reign as manager, while Roque Santa Cruz, Shaun Wright-Phillips and Shay Given are also finding their transfer valuations or wages to be too high for prospective buyers.

No, I know you don't know who these people are: they're soccer players, and that's not the important point either. It's the "inflated salaries" that are.

The letter, sent by a company in Suffolk to a farmer in Northumberland, states: "By hosting a wind energy project, this could provide a secondary source of income by diversifying the use of the land, which we would estimate could be in the region of £18,000 per turbine per annum.".......But experts suggest the offer is far too low. Landowners are now seeking about ten per cent of the annual turbine income as rent - or in this case around £60,000 for each turbine......

Ben Collard, director of renewables at George F White, said he was advising his clients to set rent on land used for a wind turbine at ten per cent of the estimated income.

Mr Collard said: "One of our clients has a drawer full of offers. He has at least 12 offers. I would say at least ten per cent of the total revenue should be the starting point for negotiations.

That's all about finding the land on which to build windmills, subsidised in various (but for the moment, unimportant) ways.

Celebrities, soccer players and windmills don't seem to have much in common: but they do at the level of trying to work out who gets how much money and why.

In any process, any system of producing a good or service, the money is going to end up going to those who own the scarce but necessary input. Until CGI gets much better actors are necessary to make movies: thus much of the possible profit of the movie business ends up in the pockets of those few actors who are indispensable. To build onshore windmills you've got to persuade a farmer to let you do so and there's a limited supply of farmers happy to do so. So farmers get a goodly piece of whatever profit can be made out of building windmills. (Note that the annual earnings from one of these windmills is at least 10 times the cost of a hectare of land.)

There's no shortage of soccer players, this is true, but by definition some small number of them will be fractionally better than the rest. So we have a shortage of soccer players that bit better than the others and thus most of the money in the game will go to those slightly better than the other soccer players.

And thus it is with celebrities, singers, actors and all the rest. If there's a system which relies upon a rare talent, rare resource, for that system to work, then most of the money in that system will end up in the hands of those who own that talent or resource.

Which is why celebrities earn so much money: they're the people who own the rare talent upon which the entertainment industry relies.