$400 Million

It is free agent season for the National Basketball Association and another star player signs a big contract -- $111 million for Gilbert Arenas. This is guaranteed money. Yet, this pales in comparison to another big contract announced today: talk radio's Rush Limbaugh signed with Clear Channel for $400 million over 8 years. While the topic of Limbaugh and his impact on the political environment could lead to a lively debate, I am interested in this question: Has he earned the windfall?



First, some comparisons. With the new contract, which includes a $100 million signing bonus, Limbaugh's annual salary ($50 million not counting ancillary income from merchandise, etc.) now surpasses celebrities like Leno, Letterman, and Dr. Phil but is still well behind Spielberg, Oprah, and J.K. Rowling.



Like many of these celebrities, Limbaugh is a businessperson. Unlike many of them, he created a new market, so he is in some ways a entrepreneur who hit it big. In the mid-1980's am radio was a dying medium. The radio played mostly to local audiences. In 1988, Limbaugh took the chance of taking his show national--identifying a market need for a point of view (and style) not found in other media venues. So he is much like the many entrepreneurs who identified a new market and were able to exploit it. This NY Times Magazine article, which also came out today, tells part of the story.



Not only did he create a new market, he built a strong buisness model. He saw his customers as not only his listeners but the advertisers promoting their products on his show. He built a loyal audience (customer loyalty is what every product or company seeks) that not only listened--creating the largest radio audience--but bought the products of the companies sponsoring his show.



And he has made this work for 20 years; a proven talent and formula convinced Clear Channel to pony up for $400 million for 8 more years. It was a business deal based on market results . . .