Does anyone know if Erin won the biggest payout on a reality TV show at $2 million?

• RE: Did Erin Win The Biggest Payout On Reality TV?,gotmyjd2003, 02:58 PM, 11-25-03
  • And ...,AyaK, 09:17 PM, 11-25-03

this is such a late reply that i doubt anyone will even read it, but the answer to your question is a hedge: yes and no. On the one hand, the sum of $2 million is the most ever paid out to a reality show contestant. On the other hand, whereas most reality shows actually pay out the winning amount (less taxes, which are considerable) right away after the show, FLOM had a very unusal arrangement in which the award money was paid out in an annuity over 40 years. This is very similar to a lottery arrangement, except that even lotteries usually pay out within 26 years. So the bottom line is that Erin only stood to get paid $25k/year after the first FLOM. One could argue that that's why she chose to do the second one. Now, even after winning $2 million, she still only gets paid $50k/year for the next 40 years. Of course, if she doesn't last the full 40 years, the remaining amount need not get paid out.

...if you look at the news threads for FLOM, taking into account the time value of money, you'll see that we calculated the present value of the $1 million annuity at around $450,000. Thus, the present value of the $2 million annuity is around $900,000 -- which means that Erin won less than each of the seven Survivor winners, because the present value of $1 million paid today is $1 million.

Don't be fooled by NBC's "$2 million" hype.

--AyaK, JD, CPA