Over the weekend, news came out that Katie Couric had agreed to a new deal with Yahoo! (YHOO) that will keep her there at least for another year as "Global News Ambassador." Multiple outlets have reported that Couric will make $10 million a year, an increase from her old contract that was worth $6 million a year.
I don't understand why Yahoo! -- and specifically CEO Marissa Mayer -- chose to do this.
Last April, The Wall Street Journal presented an accounting of what Couric does in terms of video views and what the going ad rate is that Yahoo! can realize selling against those videos. The Journal's conclusion: It's likely that Couric only generated about $2.5 million in ad revenue last year, far below her salary.
Will that increase this year? Unlikely. Why then is Yahoo! going to lose even more money on this deal?
At a Fortune event a few weeks ago, Mayer referred to the Couric relationship as a "profitable" one for Yahoo! Profitable, how? It's only profitable for Yahoo! if Mayer was using a tortured way of calculating that figure and subtracting out a bunch of costs that she probably shouldn't.
Why is Yahoo! doubling down on this relationship? Mayer's Fortune comments referred to how the Couric relationship wasn't just about money. That it's about what she symbolizes to the rest of the company and to advertisers. I don't really understand what that means.
I think the bottom line is that Mayer likes Couric. Just how she likes Yahoo! Editors Bobbi Brown and Joe Zee, and sponsoring the Met Gala. It's not about economics. It's about a personal choice Mayer is making at the expense of shareholders.
I have nothing against Couric. As a shareholder, though, I want to see every person who is "talent" generate more revenue for the company than they cost. If they can, great. If not, let's redo the contract until it works or hire someone else.
The company should have done that here with Couric. Instead, Mayer doubled down on a bad contract.