"It would have cost us a lot more money to do it than they were going to pay us," he said.
"We couldn't, deep in our hearts, say yes to it because we knew that it would be setting a precedent… If Sheppard are going to be able to play for that fee, then everybody else is going to."
Sheppard made the comments after writing a Facebook post critical of Commonwealth Games musical director Katie Noonan. Among other things, he called the former George singer "mean" and "nasty".
"Karma is a bitch," he wrote.
The singer said there was bad blood with Noonan before the Commonwealth Games offer, dating back to 2016 when she criticised the band for not appearing at the Queensland Music Awards to accept a prize.
"No regrets from me, ever," he told Hit 105 listeners over his online comments.
Katie Noonans manager, Jesse Flavell, hit back at criticisms by clarifying that Noonan was only a "cog in a very large machine."
"The misunderstanding of Katies role and responsibility as musical director of the Opening Ceremony needs some correcting. The role of the musical director (MD) is to provide creative suggestions and options to the artistic director and the senior creative team (and multiple additional stakeholders) and to work with them to deliver their vision for the ceremony," Mr Flavell said.
"To suggest that the MD has unilateral control and the final say on any creative decisions for events of this magnitude is incorrect.
"To suggest that the MD is involved in setting the commercial terms offered to any performers is incorrect.
"To suggest that the MD controls the camera work and editing choices of the broadcast partner is incorrect.
"Katie was contracted to do a job as an MD and a performer, which she nailed. In this context, she is a cog in a very large machine."
Earlier this week, Noonan took to Instagram with a teary-eyed post, following wider criticism of the Games' opening ceremony.
"There has been some horrible media suggesting my musical direction of the Comm Games opening ceremony was driven by ego rather than for good," she wrote.
"For me, that is the ultimate insult. I feel so deeply sad as my own interests were never the goal… Onwards and upwards."
The entire fracas has drawn comment from Queensland's Minister for the Commonwealth Games Kate Jones, who defended Noonan's work on the ceremony and described the situation as a "dispute between artists".
"I've known the Noonans for a long period of time… They've always been generous with me and with our local community," she said.
"I thought Katie sang beautifully at the opening ceremony, and certainly I don't want to detract from what I think was a great opening ceremony."
When contacted further about the issue, a spokesman for the minister responded: "Jack Morton Worldwide was appointed by GOLDOC as the official producer of the Games and was responsible for negotiating all contracts with performers in the opening ceremony.
"Its important that artists are paid a fair price for an honest days work and I understand GOLDOC is investigating."
GOLDOC has been contacted for comment.
Broede Carmody is an entertainment reporter at Fairfax Media.
Rob Moran is an Entertainment reporter for The Age, The Sydney Morning Herald and Brisbane Times.
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