The core premise of Shark Tank consists of bringing entrepreneurs and investors together in the hopes of success and riches. But do the entrepreneurs-turned-contestants get paid for their appearance? You might be surprised to learn that no, they don’t get paid, but the Sharks do.
There are many reasons why the contestants don’t get paid, but the sharks do. Contestants don’t always appear on the show to get a deal, but those who do can benefit greatly. Read on to learn more about why not getting paid as a contestant isn’t necessarily a bad thing.
Contestants vs. Sharks
The main reason why contestants don’t get paid to appear on Shark Tank comes down to the fact that they’re not part of the production. It’s true that the contestants make up 50% of the reason why the show exists. They’re also aware that they’re pitching their product for a shot at an investment that helps propel them to fame and fortune.
Contestants Were Required to Have Skin in the Game
It used to be that the show required contestants to consent to fees that consisted of 2% equity in the company or a 5% royalty on all sales of products that were pitched on the show. Contestants had to pay one of these fees, no matter if their product was picked up by a Shark or not. However, this requirement was dropped when Shark Mark Cuban learned about it.
Cuban felt that the quality of the contestants would drop if the production company didn’t get rid of the fee structures. The executive producer, Mark Burnett, listened to Cuban and eliminated the fees.
The money raised by the fees was intended to finance the production of Shark Tank and act as free advertising for the contestants. But the overall commercial success of Shark Tank made it easier to drop the fees. Contestants who appeared prior to the dropping of the fees also got their money refunded to them once the policy was changed.
Sharks Get Paid for Their Appearances
The Shark Tank panel is made up of a panel that doesn’t change all that often. In fact, many of the Sharks have been appearing since the show first aired or shortly thereafter. The fact that the main panel appears season after season means that they have to be considered stars of the show and are subject to SAG-AFTRA rules even though they’re not actors.
The Sharks fall under the TV host category, have recurring roles, and guide the discourse throughout each episode. As such, they’re entitled to compensation for their appearance. It may seem unfair that the Sharks get paid while the contestants get nothing, but it’s a more equitable arrangement than you might think.
What Contestants Get Out of Appearing on Shark Tank
There’s more than meets the eye when it comes to appearing on Shark Tank as a contestant. A contestant knows going in that they’re not going to get money from the production company for their appearance. They’re also aware that they may walk away without a deal in hand. Something that they’re also aware of is the fact that Shark Tank isn’t the only investor group around.
Not everyone takes the deals that are offered by the Sharks, and those who don’t get deals aren’t necessarily out of luck. A contestant who gets onto the show is one that has an idea that’s strong enough to get them to the soundstage. Just because a Shark doesn’t enter into a handshake agreement with a contestant doesn’t mean that the product is a bad one.
Going onto Shark Tank with a product tells the world that you have a solid idea, but maybe it’s not strong enough for a Shark to pick up. Other investors are free to contact the contestant and help fund the production of the contestant’s idea or product.
The money may not be as good, but the contestant gets their product off the ground and into people’s homes. They can also use “as seen on Shark Tank” language in their promotions without the risk of a lawsuit.
There’s no Obligation to Accept an Offer From a Shark
A Shark can enter into a handshake agreement with the contestant, but the contestant is under no obligation to accept the offer and agreement.
The handshake is non-binding, but the contestant can formalize the offer if they wish through a properly written contract. It’s known that contestants sometimes go on the show simply to raise awareness of their product on national TV.
Contestants may also change their minds if they feel that the Shark asked for too much without giving enough in return. There’s also a period of due diligence and contract negotiation with the Shark that can take months to complete and can cause a contestant to turn down an offer.
Last, but not least, there is no guarantee that the Shark will execute the offer that they made. A majority of the offers are extended because that’s the premise of the show. Making the offer non-binding on both ends avoids the need for legal action if someone backs out on the deal at the last minute.
Contestants Win Even if They Lose
There’s a high bar to get onto Shark Tank as a contestant. The contestant has to have a product that’s viable in terms of production and market before they can get onto the show.
Appearing on the show also demonstrates that the contestant is willing to act in good faith when it comes to working with investors. A contestant who doesn’t get an offer from a Shark seemingly goes home without compensation, but that’s not the end of their story.
Contestants without offers aren’t going to start at square one when they get home. Their appearance on Shark Tank helps them find funding from investors or banks for the production of their products.
There’s always someone who’s willing to invest in a product with potential, and a product that was good enough to make it onto Shark Tank is one that has the potential to make money for all involved.