In December 1997, Jack Welch took Jerry Seinfeld to brunch. Welch ran General Electric, which owned NBC. Near the end of the meal he wrote a number on a slip of paper and slid it across the table. The number was $5 million an episode, or $110 million for one more season. Seinfeld said no, and the show ended that May.
For nearly thirty years that no has been told as art beating money. David Rosenthal and Ben Gilbert, hosts of the Acquired podcast, argue in the Journal that it was the right money call too. Here’s why. NBC didn’t own Seinfeld. Old FCC rules kept networks from owning their prime-time shows, so Castle Rock Entertainment made it and NBC paid a fee to air it. Seinfeld and co-creator Larry David each reportedly got 15% of the syndication profits, the money a show earns when stations buy the reruns. In TV talk, they owned the back end. The show earned NBC about $200 million a year, roughly a fifth of the network’s operating income. Seinfeld himself already made $1 million an episode, a record at the time.
The back end turned out to be enormous. The first five-year rerun package sold for an estimated $500 million, a record then. The second cycle, in 1998, reportedly doubled that to over $1 billion. Streaming didn’t kill it either. Netflix reportedly paid well over $500 million in 2019 for five years of rights, then renewed at a similar price. The hosts put the total at over $4.5 billion in rerun and home-video revenue since the show went off the air 28 years ago. By their napkin math, Seinfeld’s slice is north of $600 million. That’s at least five times Welch’s offer.
Why quitting on top paid
Most old shows are worth nothing in reruns. Seinfeld kept growing. Local stations found that its reruns beat live shows in the same time slot. The hosts argue that ending on top is what kept the demand alive for decades. Seinfeld later said he didn’t think about the money at all. He thought about the audience, and about leaving while they were still screaming. Nielsen counted 72 million Americans who watched at least one episode between January and August of this year. That’s close to one in four people in the country. When Harvard Business Review suggested in 2017 that McKinsey could have helped him keep going, Seinfeld asked if McKinsey was funny. It wasn’t. “Then,” he replied, “I don’t need them.”
Our read
This is a career story, and a business-owner story. The paycheck was the $110 million. The back end was the 15%. Most of us never get offered either one. The same choice shows up in smaller forms all the time. Salary or stock at a startup. Sell the business now or keep the cash flow. Take the pension as a lump sum or as a check for life. A slice of something that keeps paying can be worth more than a bigger number today. It can also be worth nothing. Seinfeld’s slice worked because the show kept drawing viewers for decades. Plenty of back ends never pay a dime. Owning a piece is a bet on longevity, and you should know that going in.
If any part of your pay or your business comes as a share of future profits, that’s the one thing to look at this week. Find the paper that spells it out. Check what you actually own, when it pays, and what happens to it if you leave. A back end you can’t explain in two sentences isn’t an asset yet. The umbrella check happens on a dry day.