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Money Secrets of the Celebrities: New Book Details ‘How Famous People Make Money’

GUEST AUTHOR BLOG: Celebrities Money Making Secrets by Jo Piazza author of "Celebrity, Inc.: How Famous People Make Money."

When it comes to making money, celebrities are deeply abnormal. Their enormous salaries make them outliers in the American economy, on a pay grade above most chief executive officers, surgeons, and lawyers—the professions that typically come to mind when we think of the wealthy.

Johnny Depp
Getty Images
Johnny Depp

While maddening, Johnny Depp’s $50 million take last year makes some sense to the celebrity consumer, but the not so transparent income streams celebrities receive just for being famous is what truly makes them nothing like us, no matter what US Weekly tries to say.

Some celebrities like Depp have day jobs. They act, they sing, they throw a ball. Sometimes cameras just follow them around and film them going to clubs and fighting with their boyfriends, but today even that is considered a job. Those activities earn them a paycheck. But in addition to that income stream, celebrities make money from numerous other things regular people typically spend money on, be it having babies or supporting a charity, tweeting, or losing weight. The lucky ones even cash in during the afterlife.

Plenty of celebrities will make more dead than you will ever make alive.

Spencer Pratt from the MTV reality show “The Hills” told me he capitalized on his bad boy image to drive his market value higher and higher. The more he acted like a jerk the more clubs were willing to pay him to hang out there ($25,000 a pop), companies would pay him to tweet ($100,000) and magazines would pay for his pictures ($300,000 in a year). Pratt capitalized on one of the secret Hollywood income streams taken advantage of by nearly every celebrity (A-listers and reality stars alike)—the staged photo opportunity. You may think all those shots you see in US Weekly, In Touch and People magazine are totally candid, but the truth is celebrities often have a deal with the photo agencies that sell them whereby they make 50 percent of all the profits from the photos sold. By selling a couple photos of them in the grocery store or pumpkin picking with their kids these people can make what the average kindergarten teacher makes in a year ($52,240).

Jo Piazza | Celebrity Inc.
Jo Piazza | Celebrity Inc.

In my book, "Celebrity, Inc.: How Famous People Make Money," I refer to the players in the fame game as the Hollywood Industrial Complex—an internecine web of businesses, all working to create value from everything a celebrity does.

It includes agents, managers, and publicists, each in their own way creating new business models and revenue streams for the complex’s front line—the celebrities themselves.

These individuals are constantly working to monetize everything in a celebrity’s life.

Take the question of whether Celebrity X should marry Celebrity Y. It triggers a complex series of negotiations between X’s and Y’s respective teams. How can the value of a marriage be maximized? Will it help or hurt X and Y?

The same holds true for the questions: Should X adopt a baby from Africa or Asia? Which market buys more movie tickets/music downloads? Should Y create a celebrity fragrance? Should X cheat on Y with Z? What is Z’s brand value? It’s the algebra of agent speak.

Very little is precious in Hollywood. Even less is immune from the machinations of moneymaking, even babies. As the tabloid magazine market reached a tipping point and Internet gossip began to gain legs in the mid-2000s, the tiniest stars in Hollywood—celebrity babies—became the focus of multimillion-dollar bidding wars. Celebrity spawn became hot commodities, leading to the most expensive baby picture sale of all time.

Editors of celebrity weekly magazines later saidit was a little like a drug deal—the day they were led into a dark office and shown the first pictures of Shiloh Jolie-Pitt, premiere biological spawn of movie stars Brad Pitt and Angelina Jolie, and asked to place bids. The question posed to the editors was deceptively simple and impossible to answer with any confidence: How much were these photos worth?

"By selling a couple photos of them in the grocery store or pumpkin picking with their kids these people can make what the average kindergarten teacher makes in a year."" -Author, "Celebrity, Inc.", Jo Piazza

It was determined by the “winner’s curse,” a classic problem in game theory. The most obvious real-world example is when several oil companies bid for the right to drill for oil in a particular tract. Some guess too high and some will guess too low. On average the guesses as to what the oil is actually worth are about right. But the auction doesn’t select the average guess. It selects the highest bidder.

During the baby picture bull market magazines bid for the rights to the pictures with no one knowing how much they would add to the bottom line of a celebrity magazine. Some editors will guessed too high, some guessed too low. The auction systematically selected the optimist—People magazine.

In full this process is believed to have netted Brad Pitt and Angelina Jolie $17 million for pictures of three of their children. That could send 114 kids to Harvard.

With the rebirth of the entertainment industry in a digital age, the consumer has more and more to be wary about. There are more opportunities than ever for celebrities to make money on Twitter and in viral videos, from the sale of baby pictures and by losing weight, through fragrance sales and sex tapes. Consumers deserve to know how they’re financing these outliers.

Jo Piazza is this author of "Celebrity, Inc.: How Famous People Make Money." She is a journalist, columnist who writes on topics ranging from entertainment to religion to women’s issues around the globe. She began her career as a staff writer at the New York Daily News and her work has appeared in the New York Times, the Wall Street Journal, Glamour, Gotham, The Daily Beast and Slate.

Email me at bullishonbooks@cnbc.comAnd follow me on Twitter @BullishonBooks