The Money Godmother's Blog

Knowing that Santa works hard so everyone can enjoy December 25, I particularly enjoyed the article below today. It’s by Julie Sturgeon, found at www.Bankrate.com:

Every year about this time, children and accountants study Santa Claus and ask: How does he do it?

The kids, of course, wonder how their red-suited benefactor gets down all those chimneys in just one night. But the accountants have another question: Exactly how does the Santa business model work?

Sure, the old guy picks up a handsome paycheck for all those shopping mall hours he puts in. And he has a few other sources of income. But then he gives away all those presents. As any parent can tell you, that’s not cheap.

So Bankrate.com, always fiscally responsible, decided to take a look at Santa’s balance sheet and see how this all works out financially.

Income

Since the 1950s, Santa Claus has found gainful employment at shopping malls across the United States, grinning for the cameras while hugging everything from screaming tots to drooling dogs. But the photography companies pocket the profit from those pricey picture packages — Santa is actually an hourly employee at the approximately 1,000 enclosed malls in this country.

According to the International Council of Shopping Centers, Santa reported for work at a majority of these locations in 2008 on Nov. 14, which gave him 40 days of employment. Because 97.1 percent of the malls extend their shopping hours during December, it’s a safe bet he’s on duty 10 hours per day, even with two meal breaks, for a time card of 400,000 hours. Then, of course, he has his traditional haunts: Macy’s on 34th Street in New York and rival Bloomingdale’s uptown. Not to be outdone, South Street Seaport has also jumped into the fray demanding his presence, so add another 546 hours.

That means Santa would bank $2,903,958.50 at the federal minimum wage of $7.25. However, a few years ago, this savvy dude capitalized on years of experience (not to mention a real beard) and negotiated an average salary of $10,000 a year with the photography vendors, so in reality he’s bringing home $10,000,000.

And because Christmas boils down to seasonal work, he has begun appearing at award nights, conventions, birthday parties and casinos throughout the year, commanding hefty fees between $1,200 and $10,000 per job. A couple of these gigs a month would pull in roughly $224,000 in extra cash throughout the year.

Unfortunately, he’s missing out on the real cash cow. According to Steve Weinberg, a shareholder with the Greenberg Traurig law firm, the holiday icon has no claim to any royalty income. For starters, his history is a bit too murky for a lawyer to establish intellectual property rights to the roly-poly, eye-twinkling, gift-giving image. Over the centuries, Santa’s identity has merged with those of Nicholas the Gift Giver — St. Nicholas, sans the red costume in Washington Irving’s tales — and Kris Kringle.

Haddon Sundblom created the current character known as Santa Claus as an advertising campaign for Coca-Cola in the 1930s, so the soft drink company actually has a stronger case to get the money than Mr. Claus himself.

“And assuming we could make the case he owns his reputation, he’s really given it up to the public domain,” Weinberg says. “In IP (intellectual property) law, if you don’t exercise control over other people’s uses of your reputation, you end up essentially abandoning your right to claim royalties.” Santa’s failure to send cease-and-desist letters to Tim Allen for portraying him in the movies was the final mistake.

Bottom line: Santa earns a little more than $13 million annually. Weinberg’s former clients, the Muppets, are actually richer than Santa.

Expenses

Santa’s gift-giving extravaganza certainly has come a long way from the days Ralphie yearned for a Red Ryder BB gun. Twenty-first century kids crave everything from interactive musical chairs to Nintendo Wiis. Using Dr. Toy’s lists of top toys in 2008 for infants through age 6 — face it, after that they stop believing in Santa, so the big guy is off the hook — we determined the average price per toy. One request per customer, please.

The damage looks like this:

So Santa spends $778,005,690, which qualifies him for the free shipping deals. Lest you think him a spendthrift, these prices also reflect the lowest available on comparison shopping Internet sites, and he has been known to shave a few additional bucks by watching the Sunday newspaper ads.

The staff at InsureMyTrip.com say baggage coverage for these presents would be written as a cargo policy through Lloyds of London, priced at 15 percent of value, so he needs to budget $116,700,850 for the journey. On the other hand, “Santa’s never missed a Christmas, even when Rudolph’s nose was on the blink, so trip cancellation coverage is not an issue,” says Vikki Corliss, a spokeswoman for InsureMyTrip.

With crazy diseases flying about, medical and medical evacuation coverage is critical this year. He can lock in a $2 million medical and $2 million medical evacuation policy for a mere $129 premium for the night. Corliss says her company would be pleased to cover the cost of the personal policies in exchange for an InsureMyTrip.com logo on the side of Santa’s sleigh.

He needs to consider the endorsement. After all, the volunteer group of seniors in Santa Claus, Ind., save him $3,700 a year that he’d otherwise have to spend on postage answering letters from children who choose this route over the more popular e-mail option.

The sheer volume of presents means Santa’s elves need to work extended hours. While seasonal wages tend to be lower than salaries, Dan Maddux, executive director for the American Payroll Association, is very conscious of the fact the North Pole’s minus-31-degree winter temperatures puts a damper on recruiting. As a baseline, Maddux estimates Santa pays each elf $1,624 in biweekly salary.

“Since the elves are under Santa’s control and direction, and work on-site at the workshop, they are considered seasonal hourly employees rather than independent contractors,” he says. That means Mr. Claus must also pay employment taxes and provide worker’s compensation.

And let’s face it, if Macy’s had to hire 8,500 seasonal workers across just its Western division this season, Santa needs to at least match that number.

So over the five-week frenzy, he must budget $34,510,000 in payroll needs.

Finally, tired of the same old scenery, Santa Claus indulged in a summer home in North Pole, Ala., this year. He secured the 4 acres on Lot 3 on Santa Claus Lane from a Re/Max Realtor at $1,425,283 and built a six-bedroom, 5,300-square-foot home valued at $550,000. A 30-year mortgage loan for the $1,975,283 at 6 percent with 5 percent down means he has to cough up an $11,250.67 monthly payment, or $135,008.04 on the year.

So what’s it all add up to? Well, Santa’s dimples won’t be so merry when his calculator determines that he owes $931,191,823 — at least $921,191,823 more than he makes. That’s serious bankruptcy material, and he has yet to feed his reindeer.

Tara-Nicholle Nelson, a licensed real estate broker and attorney in Oakland, Calif., who owns Tierra Real Estate and Mortgage Services, offers Santa one small option. She sized up the value of his current workshop at the North Pole — which includes a 3,000-square-foot single-family residence with special features like a gourmet chef’s kitchen, a campus that houses a 2,500-bed dormitory, a 500,000-square-foot warehouse and stables — against similar properties in Alaska and determined that he is sitting on $39,745,720 worth of property.

“He’s going to have to find other work if he wants to make money,” Weinberg says. “Maybe he can be the next Harry Potter character, but of course this is only one Jewish guy’s opinion.”