Reality TV's big bottom line: Do these stars deserve such big paydays?

There's a little secret in the world of reality shows that may be undermining the very premise of the programs -- and it's not that the shows are as unscripted as their producers would like you to believe.

Once thought of as a cheap way to get programming on the air, reality shows like The Hills and The Real Housewives of New York City are facing increasing costs to meet the salary demands of their stars. In fact, some reality-show personalities are earning per-episode fees that approach or even exceed those of actors in scripted dramas or comedies.
MTV's The Hills, for example, is reportedly paying Kristin Cavallari $90,000 an episode, while the program's other top cast members Audrina Patridge, Lauren Bosworth and Heidi Montag are grabbing $100,000 per episode, according to The Daily Beast. (Montag disputed that report on Wednesday, telling Access Hollywood that she has never made that amount and adding, "I don't do it for the money.")

For comparison's sake: Jon Hamm, the actor who has won accolades for his portrayal of advertising executive Don Draper on AMC's Mad Men, earns just $75,000 per episode, according to TV Guide.

The soaring salaries on reality-show sets are starting to cause some tensions, however. In July, after the Real Housewives of New York City stars -- including LuAnn de Lesseps, Bethenny Frankel and Jill Zarin -- signed a contract to earn more than $30,000 per episode for the show's third season, a contract dispute flared. The conflict has apparently been resolved, with Bravo recently announcing that it's started production of the show's third season. Bravo spokeswoman Rachelle Savoia declined to comment, adding that the network doesn't disclose fees or salaries.

"It does pinch the profitability of the shows," says Harold Vogel, the author of Entertainment Industry Economics: A Guide for Financial Analysis and the CEO of investment firm Vogel Capital Management. "Even if you pay a per-episode fee of $75,000 or $100,000, for someone who brings in an audience, those types of salaries can be justified, but I don't know they can go much higher than they can now."

That's especially true when both cable and broadcast networks are battling a major advertising slump. According to TNS Media Intelligence, advertising spending on The Hills fell in the first half of 2009 compared with a year earlier. The show brought in $8.1 million in ad sales in the first six months of this year, compared with $8.16 million for the same period in 2008, TNS tells DailyFinance. MTV officials didn't immediately respond to a request for comment.

The higher costs can have an even greater impact on reality shows because they're typically working with smaller budgets. A scripted drama, for example, may cost $3 million per episode to produce, while a reality show might require a budget of $750,000, Vogel notes.

Combine the high-stakes money paid to reality stars with a personal crisis and the issues become even messier. Just look at Jon and Kate Gosselin of Jon & Kate Plus 8, who reportedly receive as much as $75,000 per episode. Those earnings may go up in smoke along with the couple's marriage. TLC on Thursday suspended filming of the show after Jon Gosselin's attorney barred production crews from the family's home, according to the New York Times. It's to TLC's benefit to sort out the mess, given that the show's ad revenue rose 6.9% to $19.3 million in the first half of 2009, according to TNS Media Intelligence.

There are reality programs that still hew to the winner's pot formula. Show contestants may not earn a hefty salary, but they are in the running to take home big winnings if they're the last one standing (think Survivor and its $1 million payout to the last man or woman on the island.) Dancing With the Stars, ABC's hit dancing program, adheres to a similar formula, with the stars guaranteed bonuses for each week they survive the judges.

Many of the top stars for scripted dramas and comedies still out-earn their reality-show brethren. Charlie Sheen on CBS' Two and a Half Men rakes in $875,000 per episode, while Mariska Hargitay of Law & Order: Special Victims Unit commands a fee of $400,000 per episode. And, of course, there were the stars of Friends who, in 2002, negotiated to earn $1 million per episode each.

At the end of the day, the stars of both scripted and reality shows like The Hills and Real Housewives share a common goal: Their high-flying salaries are dependent on increasing ratings. "Right now it makes sense [for reality stars] to get paid what they're paid," remarks Vogel. "Once the ratings plunge, forget about it."
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