Forbes' Most Overpaid List Continues to be F'd Up

Forbes recently published it's list of the most overpaid actors of 2009.

I wrote a much longer post on this last year so I'll keep it short and in easy to follow, bullet point observations.

- The way Forbes computes this list makes no sense. They essentially divide the movie's income by the stars pay and compute a rate of return. It's slightly more involved than that. Again, read my post from last year.

- Even if you choose to ignore the dozens of factors that contribute to a movie's success (I don't know, script, director, marketing, the subject matter, budget, etc.) - which obviously make the list moot to begin with, the list doesn't make sense.

- Why doesn't it make sense? Simple. The formula works on multiples, not on whole dollar amounts. If you paid George Clooney $100 million and his movie net $200 million - his multiple is "2". If you pay a lesser actor $5 million and their movie nets $25 million, the multiple is "5". This would land the lesser actor on "bargain" list and Forbes would brand Clooney as overpaid. The simple problem....Clooney's movie made a lot more money for the studio.

Every year Forbes publishes this list, and every year they get a fair amount of attention for it (it lands on a number of other web sites).

The entire methodology behind the list doesn't make sense.

This is what I ended with last year: "If you pay Jennifer Love Hewitt $5 million and Angelina Jolie $15 million, the Jolie movie’s gross income doesn’t need to be triple Hewitt’s to justify the cost, it just needs to be $10,000,001 higher. Forbes would require Jolie to generate three times the income, and that makes no sense. There’s no variable costs tied to Jolie that would justify that extra profit burden on her."

It's a shame Forbes, a respected finance publication, botches this. I e-mailed Dorothy Pomerantz last year but she did not respond.