Wednesday, December 8th, 2010

Math Is Hard: Is Jessica Simpson a Billionaire? (No!)

A quick note on how math and business works, regarding this: "Singer Jessica Simpson is on the fast track to becoming a fashion billionaire—her various clothing and beauty ventures have racked up a huge $750 million in sales in the last year alone." Uh? "It’s hard to believe that Jessica Simpson is in fact a fashion powerhouse, sitting at the helm of a nearly $1 billion empire." It is! Although to be fair to the reporters of WWD, it is fascinating that of all the celebrities who tried to cash in on fragrances and sunglasses, she's the success. But yet one of the things about businesses is that they have "costs," "profits" and some things called "net" and "gross"? And also? It's not her company? So like, basically, do not be alarmed, tiny, tiny little-person Jessica Simpson is not a billionaire and that in any event this putative "billion dollars" (which is not a billion dollars) is from products made by companies (companies that also perpetrate the nightmare that is Tory Burch!) nested within companies to which she licensed her name for fees plus a few points.

18 Comments / Post A Comment

El Matardillo (#586)

In other news, your cat has been appointed as Ruler of the Galaxy.

Journalists who cannot balance their checkbooks or calculate a dinner tip should not under any circumstances be allowed to use the term "billionaire."

That is all.

But I do appreciate your (ultimately futile) attempt to beat back the flood, Choire.

boyofdestiny (#1,243)

I feel like I read something the other day, wrt a discussion about tax cuts, that the new popular conception of the term "millionaire" is someone who makes a million dollars a year, and not someone who has made a million dollars. Does this sound familiar to anyone? And is it true? Because it seems bad.

deepomega (#1,720)

As with a lot of economic labeling, it gets complicated! I've heard claims of being worth a million in assets, which sounds much more reasonable as a metric, but also is a lot less impressive.

Bittersweet (#765)

It seems to me that "millionaire" can't denote someone with a million in assets or someone who's made a million bucks in their lifetime, because then wouldn't it be a less exclusive club? I mean, make low six figures for 10 years and suddenly you're a millionaire? Doesn't seem right somehow.

ericdeamer (#945)

Seems to me "millionaire" is basically an outdated colloquialism that doesn't have any specific meaning, and it really shouldn't because it's not that much money nowadays (not saying I know firsthand, I'm totally fucking poor and an angry class warrior). In theory it should mean anyone who has a million dollars or more of assets. Where it gets stupid is that to make various cheap political points people include or don't include the value of the person's primary residence. Like I once saw Thomas Sowell or some similar moron in writing the yearly "In America, Everything's Great and there are actually no poor people!" column around tax time assert that anyone who owns a home in San Francisco is automatically a millionaire. Anyway, a more rigorous definition I've heard is a million dollars in assets excluding the value of the person's primary residence, which makes more sense for obvious reasons.

DoctorDisaster (#1,970)

The only way I've heard it defined is by assets. And, not to get too Georgia boy on you, but if the person's primary residence is also a source of income (i.e. a farm) I think it's supposed to count.

deepomega (#1,720)

Once again, economics in America is totally fucked up by our complicated relationship with home ownership.

ericdeamer (#945)

Yes, the farm thing is actually a good counterexample (and not that far from my experience, as my parents own a small amount of farm land in Indiana). My point was just that sometimes people reason that if you own a million dollar condo in NYC or the Bay Area or wherever you're automatically a millionaire. When of course we all know that a lot of people who own such properties are insanely leveraged on them and also that the value of their real estate fluctuates greatly from day to day. If you own the condo as an investment property that's another matter, but in an urban environment you can't typically live in a property that is simultaneously income producing.

We should ask Patti Stanger.

jolie (#16)


katiebakes (#32)

I came into this comment thread specifically to make sure you already had.

Jeebus. Her tax bill could be 4 or 5 hundred dollars!

KarenUhOh (#19)

Billionaire? That's nearly four cents per zipper.

sigerson (#179)

Standard licensing terms would yield 12-17% licensing fees for Ms. Simpson, based on NET revenues. So top-line gross revenues might be $1 billion but net revenues might be substantially lower (as in less than $100 million). But even that would be at least $10 million per year. Not bad, right?

Although I believe she's dwarfed (literally and financially) by Kim Kardashian, who is making a rumored $41 million per year on her licensing deals…

Tish (#1,785)

Depends on the deal…

My clients get 15% of the licensee sell price (w/sale – unless the deal is direct to retail, in which case the % is lower, but the price is obvi higher). It’s only net of taxes, not any discounts or costs, which are carried by the wholesaler.

Depending on her royalty rate, which I think is probably around 15%, her return is looking a little better. But her merchandise agents could be taking anywhere from 15-35% of her cut… I think she would still be clearing minimum $30-45M in income.

And if her reps are smart, the lion share of that would be guaranteed… sales or no sales.

6h057 (#1,914)

"You know what's cooler than being a billionaire? Not being retarded."


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