Should Limbaugh Make More Than A-Rod?

News reports that talk radio giant Rush Limbaugh had inked a new eight year contract with his syndicator, Premier Radio Networks, for a reported $400 million payout immediately produced breathless outrage from some in the media ranks. “Is he worth that,” they asked with derision dripping from their lips. “Is ANYBODY worth that amount of money?” The short answer is “yes.”

Rush (who is among a tiny group of super celebrities who have achieved one name status) is not stealing this money, nor is he obtaining it through fraud or deceit. Premier clearly believes that they can pay him that huge sum and still make a boatload of money themselves. That is how business in free markets works.

Unlike superstar college athletes who sign big contracts with massive signing bonuses before ever throwing their first NFL touchdown or slamming down their first NBA dunk, Rush has already proven himself to be a moneymaker of epic proportions. NY Yankee superstar Alex Rodriquez set a professional sports record when he signed a ten year $275 million contract last year, but Rush has a bigger fan base, plays a longer “season” than the 162 game stint expected of Rodriquez, and is, without a doubt, the dominant force in his “sport.”

Rush did not marry into his wealth, like Senator John Kerry. He didn’t inherit it like Senator Ted Kennedy. And he hasn’t generated it by profiteering from a mass hysteria that he himself created, like Al Gore through his global warming and carbon credit scams. No, Rush has earned his payday the old-fashioned way — being the very best at what he does. He is, quite simply, the Tiger Woods of talk — who pulls down about $20 million a year himself from just one of his sponsors, Nike. Is Tiger worth it? You bet; just like Rush.

Rush Limbaugh has between fifteen and twenty million listeners, most of whom tune in daily. That means Rush’s new contract translates into about $2.50 per listener per year. He is on the air roughly 250 days a year, so that comes to about a penny per listener per day. One cent for each listener each day. “A penny for your thoughts” certainly applies to the millions who tune in each day to hear Rush’s thoughts on a myriad of issues.

A nice direct mail piece to Rush’s fifteen to twenty million listeners would easily cost $2.50, or less, with design, printing, and postage. An advertiser could send out one such piece a year, or have Rush talk about them daily, for roughly the same cost as his “exorbitant” contract. Which would have more impact? Which one is a better value?

Premier is betting that a lot of advertisers will (and many already have) see the value in paying large sums of money to be heard on Rush’s show by his millions of loyal listeners. Some will pay extra to receive his direct endorsement. Those marketing products and services regularly pay a premium in order to reach motivated and loyal shoppers. Auto racing relies on that sort of loyalty in selling advertising space on NASCAR race cars by the inch! If advertisers could pay to put their logos on Rush they would do so in a heartbeat.

Those who are most disturbed by Rush’s new contract are clearly motivated by envy and political animus. Their criticism of Rush’s compensation also reveals a complete ignorance of the relatively simple economics that underlie the deal. Is anybody worth a $400 million contract. No, but Rush Limbaugh is not just “anybody.”