I'm not a fan of American Idol, or for that matter, any of the reality shows which populate the airwaves nowadays. I've only seen part of one episode. Nonetheless, when Paula Abdul, the judge "with a heart," did not have her contract renewed due to monetary demands, I took interest.  Her predicament brings up a very interesting question: how do you judge what you're worth in the employment marketplace?

If you have a conventional job and you do your job as well as the next guy, you don't need to ever figure this out. The market already knows what an accountant or civil engineer or plumber with X number of years experience can command. If you're better than normal at your job, you can ask for a premium over the accepted amount, but you'll have to justify with ample facts and accomplishments why you deserve it. Otherwise, your salary will fall within a very near percentage of the market-accepted remuneration for that line of work.

Abdul didn't have a conventional job. She judged celebrity wannabees on American national television. For this work, she was paid between $2m and $3m annually, not a bad pay day for the work asked of her. Before American Idol, Abdul worked as a cheerleader for the L.A. Lakers and as a choreographer for some pretty hot acts like Dolly Parton, George Michael, and the Jacksons. This led to a brief singing and recording career starting in 1988. Her first album, Forever Your Girl, succeeded slowly, taking over 2 years to reach the top of Billboard's album charts, but eventually sold 7m copies. Her 1991 followup, Spellbound, didn't do as well and sold 3m copies. The 1995 Head Over Heels was so poorly received, she went back to choreography.

Her first two albums and the accompanying touring which supported them must have netted Abdul a nice chunk of change. How much I cannot say. But until Idol landed on her doorstep in 2002, it's doubtful her choreography jobs were bringing her $2m to $3m per year.  And if perchance they were -- only she, her accountant, and the IRS know the answer to that one -- the work involved in generating that $2-3m was significantly greater than what she's been asked to do on Idol.

So what is Paula Abdul worth on American Idol?  $2-3m per year?   More?  Less?

There are rumors afloat that Adbdul asked for $8-10m per year.  Who can say if those rumors are true because there are other rumors that she wanted $10m, but was offered only $8m.  The precise figures aren't all that important for this discussion.  Abdul felt she was being ripped off for her work on the show.  Idol host Ryan Seacrest saw his salary triple from $5m annually to $15m on a 3-year deal, making him the highest paid reality TV show host ever.   Abdul felt she deserved a bigger piece of the pie, too. 

Most of us can't imagine earning $2-3m per year, let alone $8-10m.  Our first impulse is to think Abdul was being greedy.   Abdul didn't create the show nor was she the star of it. Even when Abdul was a recording "star", her singles weren't hits because her singing was extraordinary or she was a superb songwriter.  She kept company with savvy producers who picked her hit repertoire for her.  You have to give Abdul some of the credit, just not all of the credit.   

How much of Idol's current success is due to Abdul?   If that were such a straightforward calculation, then it would've been simple to calculate what kind of multimillion dollar raise she might warrant.  Even then, that couldn't tell us how indispensible Abdul is to the show.  Past success doesn't guarantee future earnings.  Abdul may have attracted a lot of fans to the show, yet plenty of those fans will continue to stick around even with Abdul gone from the picture.  When a poll was taken soon after Abdul announced her departure, 51% said they'd be less likely to watch, 42% were indifferent, and 6% said they'd be more apt to tune.  Only half the viewership cares about her now, and loyalty doesn't last all that long.   When the show finds its groove with guest judges or a new judge, mark my words, Abdul's departure won't make much of a difference. 

In 2004, actors George Eads and Jorja Fox didn't show up for work at the beginning of the fifth season of hit show CSI: Crime Scene Investigation.  Both had 'only' been raised from $100,000 to $120,000 per episode, a raise that equates to almost half a million dollars per year, something 99% of the population would be happy to earn as a salary.   The network let them walk.  By that time, the show had already become a franchise, with Miami and New York versions spun off, and it was pretty clear to all that none of the actors were really critical to the show's success.  The format was what counted.  Eads and Fox came whimpering back a day later and were lucky they were rehired.

The ensemble cast of Friends was able to hold the NBC network at ransom after the show's sixth season, demanding raises from $125,000 per episode to $800,000, because the six agreed to a collective raise or a collective walkout.  Individually, they were just as dispensable as Eads and Fox.  Without one or two of them, Friends could have gone on.  As a group threatening to not renew their contracts, a very, very profitable show for the network would've gone down the tubes.  The Friends cast got a raise, a cut of the back end profits, and in the last two seasons of the show, $1m per episode apiece. 

In the real world -- that is, the world where people earn human, not superhuman, salaries -- a person's worth is determined by the type of work he does, his experience, his degree of indispensability to the firm he currently works for, and, most importantly, his opportunity costs.  In other words, what are that person's other options?  If he's a talented hire but only one firm wants or needs him, he's going to be offered lower compensation than if a dozen firms are looking for his services. 

Interestingly, when you look at the opportunity costs of Abdul, Eads, Fox, the cast of Friends, and many others in the high income brackets, their opportunity costs aren't tremendously high.  Their "street value" (i.e what they could command on any random outside project) was not roughly equal to their value on their primary day jobs, and they knew it.  Jay Leno, the talk show host, summarized it by saying that "You have to get what you can while you can in this business" because the window for getting it is usually a small one.  One's prime earning power is condensed into a very tiny time frame which can only amount to a decade or less.  Each of the Friends ensemble was only worth $1m per episode on Friends, not elsewhere.  Once Friends ended, none of the cast were offered $1m per episode salaries on new shows.   Eads and Fox aren't the household names the Friends cast became.  Once CSI is canned, it's not unforeseeable that neither will ever work a steady TV gig again. 

Abdul's opportunity costs were most likely a lot less than the $2-3m per year she was taking home from Idol, and that didn't give her a lot of bargaining power.  Nor does it help that she's on a reality show as a judge, a position very easy to replace with another celebrity. 

It must be very easy to get drunk on your own self importance when you're earning multimillions, to convince yourself that your presence played a major part in the success of the venture you're participating in.  For entrepreneurs, I wouldn't argue with that statement.  Entrepreneurs, however, take bigger risks.  As their projects get underway, they usually don't take home $22,500 per week, the salary for the Friends cast during the initial season.  In most show biz cases, the project made the actor, the actor didn't make the project.  Did actor Daniel Radcliffe turn the Harry Potter movie franchise into a success or did Harry Potter turn Radcliffe into a multimillion dollar success?  Did Leonardo DiCaprio's charms make Titanic into what was once the highest grossing film of all time or did Titanic's rich takings make DiCaprio into a high grosser?   I argue that the projects would've succeeded with any competent professional filling the shoes.  If Eads, Fox, DiCaprio, Radcliffe, the cast of Friends, and yes, Abdul, had had their shoes initially filled by another, all their most recognized projects would still have succeeded without them.   Their successes are more the result of lucky breaks they were prepared to grab and run with. 

If this weren't true, if the success of all the projects rested with the actors themselves, then the Friends cast would all have cushy six figure per episode jobs by now on other shows, their involvement turning those other shows into stellar successes along the lines of Friends. Or each would be offered millions of dollars for every feature they appeared in today, not just when Friends was still in production. Eads and Fox wouldn't have had to return to CSI with their tails between their legs.  Their presence would have had other network execs begging for their involvement in other shows.  DiCaprio went on to other huge paydays and big projects.  Titanic highlighted that he was an actor the public enjoyed watching.  In his case, his street value because equivalent to his project value, at least to those paying his checks.  Still, his presence alone does not guarantee a project's success.  His involvement just guarantees a project will get financed.

Hence, the producers of American Idol were smart not to give Abdul a raise to $10m per year.  Idol reignited Abdul's fame, not the other way around.  It being impossible to calculate Abdul's exact contribution to the show's success, the producers hedged their bets by giving her some raise nevertheless -- why risk altering a formula that's working?   Abdul walked anyway. 

Why would she walk?  A swelled head after 7 years of top ratings and easy earnings would have affected anyone's ability to think logically, for one.  Another possibility is her relative income disparity next to others associated with the show.  Pretend you have the chance to earn either $50,000 per year or $100,000 per year.  But if you choose $100,000, all your colleagues will make $25,000 more than you;  at $50,000/year, all will earn $25,000 less than you.  $100,000 is still more money than $50,000, and one can buy twice as much with it.  Nonetheless, in a Harvard study, more people chose the lesser figure.  With $50,000, they're relatively richer.   With $100,000, they're relatively poorer.  People, including Abdul, want to feel richer than those in the circles they frequent.

We, as outsiders, look at Abdul's salary demands as excessive.  We'd be happy to have her job, even if it paid a quarter of her pre-raise salary.  That wage still put her in the top half percentile of earners in Hollywood.  But Abdul from the inside, watching host Ryan Seacrest and acrid star judge Simon Cowell raised to epic salaries triple her own, felt poor and unappreciated.   Leno was right when he said you have to get what you can while you can, but when "what you can" is already a pretty generous figure and you've not situated yourself in an irreplaceable situation, the results could -- and most times, will -- backfire on you.    

Abdul could've learned a thing or two or ten from the past.  A quick call to Eads and Fox would've proven productive.  She might also have been wise to ring up Suzanne Somers, who felt she contributed a greater share to the 1970's-80's sitcom Three's Company's success than was actually the case.  When the producers of Three's Company fired Somers and replaced her with other blondes, the show continued to thrive.   Countless other examples exist, too many to list here and risk boring you to death with.

What surprises me is that if I, as a non-viewer, can size up that someone like Abdul doesn't warrant a raise to $10m/year, why couldn't she, with the help of her professional management, do the same?   This isn't rocket science.  Word gets around quickly in show business circles if so-and-so is being offered lucrative side deals.  Producers have an approximate idea of a candidate's opportunity costs at a given moment in time.  Negotiations being as they are, the producer will offer less than they are willing to pay, and the candidate will ask for more than s/he's willing to accept, but in the end, a fair figure -- don't judge fair by what applies in the real world -- will be arrived at.   That is what a mega-someone is worth and for that project alone.  Maybe when you're surrounded by yes-men telling you how much of a god or goddess you are, you start believing you're worth an extra zero or two on the end.