Dr. Dre licensed his name for a line of headphones. I have no idea how much his royalty is, but figure it’s $20 a pair.
At some point during the negotiations, perhaps someone said, “wait a minute! What if it’s a hit? What if we sell more high-end headphones than anyone has ever sold, ever, and we sell 5,000,000 pairs. That means that he’ll get a hundred million dollars. That’s absurd! We need to put a limit on this.”
We often hesitate to pay a portion of the upside to someone who is taking a risk, because we’re worried that perhaps, just perhaps, his risk will pay off and he’ll make a fortune…
The thing is, if they make a fortune, you make five fortunes. Don’t worry about it. Go ahead and give people the opportunity to have their risk pay off. More than ever, people are motivated by the opportunities that come with scale.
Reblogged from: here