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October 6, 2008

The Reality of Reality TV Show Top Prizes

Filed under: Sweepstakes,Uncategorized — Edgar (aka MrConsumer) @ 6:21 am

America's Got TalentLast week, Neal E. Boyd won the top prize on NBC’s America’s Got Talent program.  In addition to headlining one show at a Las Vegas hotel, he also won a much ballyhooed $1,000,000, or so it seemed.

Throughout the season, host Jerry Springer reminded contestants of the big prize and the chance to become America’s most talented winner.

Let’s hope that Mr. Boyd wiped the stars out of his eyes long enough to read his contract with the program, and the fine print that rolled by during the credits at the end of the show.

*MOUSE PRINT:

annuity

Translation:  Like the lottery, the big prize is doled out in small increments over decades.  In this case, the winner would wind up getting less than $500 a week for 40 years.  That’s a mere $25,000 a year.  Hardly an amount that would change one’s life.  The alternative lump sum amount is not stated, but after taxes, it is likely to be in the $300,000 range. 

The million dollar prize certainly was an attention getter for the thousands that tried out for the show, and to create excitement amongst viewers.  The winner got his shot at fame, which he might say was priceless, and worth more than the somewhat illusory million dollar cash prize.

It appears that other reality shows have also touted big top prizes that were never quite what they appeared, and sometimes, they were not even awarded.  (See end of this story.)

• • •

16 Comments

  1. In the end, I guess it is still free money

    Comment by Peter — October 6, 2008 @ 7:12 am
  2. Edgar,

    Please tell me you didnt just say that $25k a year isnt life changing! I know a family of 6 that live on less than that! Even if you simply had the money automatically deposited into a money market account and had your mortgage paid out of the account automatically every month its a huge windfall. The annuity should protect them from poor spending habits too. A $1200 per month house payment paid for you for 40 years is nothing to sneeze at, I cant believe that you’re so jaded that $25k/year is not life changing to you.

    Comment by rahlquist — October 6, 2008 @ 8:22 am
  3. @ Peter: It’s not free. Participants worked hard for the price.

    @ Rahlquist: The point is that the promised million is actually just 25k a year. Or actually 15k a year after taxes. To put it in perspective. Say you win $1000 buck in your local lottery. Wouldn’t you be peeves if they told you, sorry, you just get $25 a year for 40 years?

    All in all, the show should have advertised that ‘an annuity totalling up to one million $’ was the price. If they’d argue that that’s too long to mention, that I’d say: then give the million.

    Comment by Jasper — October 6, 2008 @ 9:13 am
  4. Lets see, 40 years = 480 months, 1,000,000 % 480 = $2,083, minus taxes = $1,354. This is less than half of what I make a month so it would take me years to get me and/or my family out of debt or even pay off my mortgage. It would certainly help a lot but nothing close to getting all the money up front and far from life changing. Yes, it might change the life of the very poor but to the rest of the country it will not. However, I’ve always told myself…”if you get something for free, you dont complain”!

    Comment by Peter — October 6, 2008 @ 9:22 am
  5. I’d take an extra $1300 a month any day. I would love to have the comfort of knowing it’s coming in every month. I cou still do everything I’d have done with a lump sum of a million, anyway. I know people that have had to live with just over half that amount of money. As a supplement to my current income, it could go a very long way. Not like I’d expect to retire off of a million anyway.

    Comment by Lindsay — October 6, 2008 @ 9:44 am
  6. Okay, I do understand that the advertised prize of $1 million sounds like a lump sum payment to the average Joe. I used to believe it was, myself.

    But then I decided to actually enter one of these $1 million-prize contests, and I read the mouse print. I also started seeing a lot of advertisements for companies that buy your “structured settlement payments” and give you a lump sum. It didn’t take me long to put the two together and figure out that the top-dollar prizes were not paid out with real million-dollar checks.

    That being said, even an extra $25K a year or $1300 a month would come in useful. I could pay off all of my debt within 3 years, including my mortgage. Within ten years, I would have two very nice college funds for my children, and an attractive retirement fund for myself. I might even be able to shift to part-time work for the next five to ten years, so I could be home with my kids. (I’m a single mom, and I really miss being home with my kids.)

    Sure, a lump sum of $1 million would be fabulous, but I wouldn’t turn away a $25K, 40-year annuity.

    Comment by Editormum — October 6, 2008 @ 10:18 am
  7. Isn’t it standard practice to have these large prizes paid out over time? I’d be more surprised if it was a million dollar lump sum payment. Although forty years does seem like a long time. I thought it was usually more like ten or twenty years.

    Comment by hatrack — October 6, 2008 @ 12:36 pm
  8. I’m sure the contestants are well aware of this arrangement before going on the show. At least no deception here.

    I also agree with a lot of commenter here. Personally $25,000 a year is nothing to sneeze at – even minus the taxes. It sure beats nothing.

    Most state and national ones like Powerball also pay out in yearly increments, but they do give you a lump sum option of half the amount before taxes.

    Comment by Frankie — October 6, 2008 @ 5:06 pm
  9. If you asked the average person about how a million dollar contest winner is paid, I suspect that many would realize it’s not all at once and probably over a span of time, a la lottery winnings, so the deception factor is minimum.

    The biggest issue is whether there is any law that requires that it be paid in a reasonable time. If you are 80 years old, should you accept the 40-year plan?

    Maybe I should try this to draw attention to my website:

    “Join my club for a chance to win $1,000,000*”

    “Winnings paid out over a period of $1 per week. Winner must either pick up check, send self-addressed stamped envelopes, or have the equivalent cost deducted from the checks. Checks are only payable to the original recipient and are not transferable. If the recipient is determined to be deceased, all payment will be terminated.”

    Anyone thing I can get away with that? Hey, and second prize can be $100,000, payable at $1 per month with the same limitations.

    Now how do I use that extra traffic on my website to make me money???

    Comment by RS — October 7, 2008 @ 1:29 am
  10. I’m sure in all of the releases and other paperwork these contestants had to sign that it was made very clear to them what the stipulations of the prize were. This is a non-story.

    Comment by Shawn — October 7, 2008 @ 8:56 am
  11. While it would be disappointing not to get that $1000000 in one lump sum, I’d like to point out that $500 a week is almost double what I earn at this very moment, and I’m earning well above the minimum wage marker for my area. Getting $500 a week for 40 years would enable me to not have to work for a large chunk of that time, at least until the cost of living made it so that $2000 a month wouldn’t pay my rent and bills any more. That kind of constant income, small though it may sound, would actually be enough to completely change my life around, even after taxes were taken out. At worst, I’d end up with the same amount per month that I do now, only without having to work a job that I dislike for it.

    “Life-changing” is a relative thing when you’re on low-income.

    Comment by Ria — October 7, 2008 @ 4:24 pm
  12. The winner on all these giveaways is the IRS. ALWAYS take the cash equivalent, whatever they reduce it to.

    The most insidious are the luxury prizes. The car, the cruise for two or some “fabulous” piece of jewelry. TAKE THE CASH.

    Ready for the 1099 on January 31? Oh yes, the Caribbean cruise for two, that you could have could have purchased on the net for $1,200 will be billed at the full retail rate, probably close to $5,000, so at 20% tax rate, you pay $1,000. Was it worth “winning?”

    It’s even worse with high-markup jewelry.

    Comment by ExitRamp — October 8, 2008 @ 5:21 pm
  13. I live on less than $800 a month. Comfortably I might add. So that $1300 would be a huge increase in my standard of living. It would make my house payment (I’m buying), pay all my utility bills, my food, and give me extra spending money. I like my job, so I’d keep doing it, and have even more money.

    The people on these shows more than likely weren’t really going for the million dollar prize. They were going for a shot at big time fame, contracts that could net them far more than a million dollars in their lifetime, and a chance to follow a dream, which is worth more than any amount of money.

    Comment by Rose — October 9, 2008 @ 9:06 pm
  14. If he don’t want the money, i sure as hell could use $500 / week.

    Comment by Goldie — October 10, 2008 @ 10:05 pm
  15. Too bad it was him at all! I thought Nuttin’ But Stringz should have won. And the money? Sucks to have to pay it all to the IRS to pay for your stupid war!

    Comment by Donna C — October 12, 2008 @ 2:21 pm
  16. Sure, almost $500 a week would be cool, BUT, they won’t be getting that much. As Peter shows, after taxes it’s closer to $300/week… at first. But don’t forget inflation. Sure, you’ll still be getting your $1300+/mo after taxes during the 40th year, but by then it’d only buy $350 worth compared to today’s prices. (Assuming the standard of 3.5% inflation.) In all, the total after-tax purchase power of the $ you would get is close to $350,000.00

    From what I’ve seen a lump-sum of $300,000 is probably accurate enough. You can purchase pretty much the same amount of “stuff” over the next 40 years, but you can do it NOW instead of in 40 years. Pay that $25k in debt you have (average american) and buy a $275k house. Don’t go back into debt and stick the extra $ you are no longer paying on debt interest or housing into a retirement fund or something.

    Still, that pales to the $600k or so you’d have in your pocket after taxes from a flat $1 mil payout.

    Comment by Cory — October 21, 2008 @ 6:08 pm

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