Tagged: leverage

Patching Up Negotiations Redux

[Ed. Note: This is a reprint of my 10/31/09 post.] Last year, procrastination got the best of me and by the time I got around to the annual pumpkin purchase on October 30th, the supermarkets were out of all but the most damaged pumpkins. I was left with no alternative than to deal with the local Pumpkin Patch Guy (a/k/a the Christmas Tree Lot Guy).

Some might say I was merely on the wrong side of supply and demand. But sitting on his throne of hay bales, Pumpkin Patch Guy went beyond aggressive deal making. He was ripping me off.

I should of walked away but it was late and the kids were tired. Feeling like a rube, I pulled out my wallet and gave him forty bucks for a couple of sad looking pumpkins plus another ten for the carving kit. This year, I got smart and didn’t go back. I planned ahead and procured my pumpkins at a substantial discount.

Like Pumpkin Patch Guy, a rep has a fiduciary duty to maximize value. But does that always result in doing what’s best for the client? Maybe so if it’s about short term value (it’s about the upfront money, stupid!).

But what about over the long term? Pumpkin Patch Guy lost me as a repeat customer by gouging me simply because he could.

Effective negotiation and deal making often require more than selling to the highest bidder. In many cases, the parties involved have to be able to work together over the long haul (e.g., SAG and the AMPTP).

Good will and occasional restraint by the stronger party can go a long way to salve the pain of accepting unpopular deal points by the weaker player. You’re not looking for a love fest here; merely a path towards building trust over subsequent negotiations.

Pumpkin Patch Guy might have earned my continued business if he’d thrown in the carving kit or a coupon for future discounts; something, anything to make me feel better about being gouged. SAG and the studios might have been able to change the discordant tone of their negotiations by simply finding more common ground through the exchange of ego nickels. Now, months after SAG sealed its deal with the studios, there continues to be profound polarization between the two camps and their supporters.

Does negotiating an arguably more fair deal really create momentum and good will for the next or does it betray weakness in your position? Does aggressive negotiation help, hinder or have no effect on the next deal? Whatever your approach, it pays to consider whose ox is ultimately getting gourd.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

[Update: Whether it was the recession or bad business practices, Pumpkin Patch Guy was replaced by Pumpkin Patch Guy 2.0.
This year's pumpkin purchase went without a hitch.
They even threw in the carving kit!]

Performance Anxiety

Most if not all negotiations are a combination choreographed dance, manipulation and fear of loss. The latter stems from our own inbred animal instincts which exert a strong influence over negotiations; even those where one side objectively has more leverage than the other.

From knowledge comes strength and while you can’t entirely eliminate fear from negotiations, the zen of knowing that it’s there minimizes its influence.

We spend an inordinate amount of time in service of our fear to our detriment. One of Seth Godin’s recent posts sizes it up nicely:

. . . . Chipmunks, wolves and other wild animals rarely get jealous. The number one emotion among wild animals isn’t vanity or happiness: it’s fear.

Fear is everywhere in the animal kingdom, because fear is a great way to stay alive. Fear is hard-wired into successful species… it doesn’t need to be taught. . . . An entire portion of our brain (the same brain the lizard has) is dedicated to fear. And it can’t wait to spring into action.

If your fear keeps you alive, embrace it. The rest of the time, the best strategy for success is figuring out how to ignore it, befriend it or use it as a compass to find what matters.

Seth’s use of fear as a compass really resonated with me. If you’re acting in the service of your anxiety then you’re probably not going to get the best result.

* Are you filling in awkward silences?

* Are you (pre?)-negotiating against yourself by offering an alternative fallback position before the other side has considered (and possibly accepted or rejected) your proposal?

* Are you being aggressive enough and asking for the Cinderella Deal or are you being too aggressive at the risk of killing the deal?

Here’s the litmus test:

If you’re ignoring your fears and taking a position that can be taken with reason, then chances are you’re being authentic and forthright. Your negotiations will, if not accepted, be perceived from the other side as strong if not tenacious and of earnest good will.

If not, then you’re not.

Patching Up Negotiations

Last year, procrastination got the best of me and by the time I got around to the annual pumpkin purchase on October 30th, the supermarkets were out of all but the most damaged pumpkins. I was left with no alternative than to deal with the local Pumpkin Patch Guy (a/k/a the Christmas Tree Lot Guy).

Some might say I was merely on the wrong side of supply and demand. But sitting on his throne of hay bales, Pumpkin Patch Guy went beyond aggressive deal making. He was ripping me off.

I should of walked away but it was late and the kids were tired. Feeling like a rube, I pulled out my wallet and gave him forty bucks for a couple of sad looking pumpkins plus another ten for the carving kit. This year, I got smart and didn’t go back. I planned ahead and procured my pumpkins at a substantial discount.

Like Pumpkin Patch Guy, a rep has a fiduciary duty to maximize value. But does that always result in doing what’s best for the client? Maybe so if it’s about short term value (it’s about the upfront money, stupid!).

But what about over the long term? Pumpkin Patch Guy lost me as a repeat customer by gouging me simply because he could.

Effective negotiation and deal making often require more than selling to the highest bidder. In many cases, the parties involved have to be able to work together over the long haul (e.g., SAG and the AMPTP).

Good will and occasional restraint by the stronger party can go a long way to salve the pain of accepting unpopular deal points by the weaker player. You’re not looking for a love fest here; merely a path towards building trust over subsequent negotiations.

Pumpkin Patch Guy might have earned my continued business if he’d thrown in the carving kit or a coupon for future discounts; something, anything to make me feel better about being gouged. SAG and the studios might have been able to change the discordant tone of their negotiations by simply finding more common ground through the exchange of ego nickels. Now, months after SAG sealed its deal with the studios, there continues to be profound polarization between the two camps and their supporters.

Does negotiating an arguably more fair deal really create momentum and good will for the next or does it betray weakness in your position? Does aggressive negotiation help, hinder or have no effect on the next deal? Whatever your approach, it pays to consider whose ox is ultimately getting gourd.

Grass Roots Licensing Of Youtube Fare

My kids turned me on to “Charlie The Unicorn” shortly after it made its debut on youtube several years ago. Like most user generated content, Charlie, a flash animated 2D short, was made on a shoestring and the production values reflect that. Still, the work is smart, funny and quotable in the vein of Caddyshack and The Simpsons.

Charlie has been viewed over 35 million times worldwide and spawned a sequel.

Still, I wasn’t really intrigued until I visited Hot Topic, a teen-oriented store in my local mall, and spotted Charlie merchandise.

Plenty of talented (and not so talented) folks make shorts and distribute them on youtube. Far fewer generate millions of views or eyeballs; and only a handful of those successfully make the jump to ancillary exploitation.

Whether Charlie’s creator is making meaningful revenues isn’t really the point (nor is the aesthetic value of such a work).

Charlie’s transition from youtube short to retail merchandise represents nothing less than a sea change in the ability of a single content creator to leverage the internet and its potential access to millions to build a following and potentially profit from ancillary and derivative exploitation of content without the need or prohibitive expense of traditional distribution channels.

It means that self-distribution is now a meaningful and sustainable distribution alternative and will become even more so as internet based distribution (e.g., faster downloads) matures.

It means that traditional distributors better figure out how to stay relevant (hint: content marketing not content distribution) or get out of the way.

Just ask the people who (used to) work in the music business.

Negotiation Culture Redux: Lying Makes Sammy Run

There’s nothing new about lying during negotiations. Almost sixty years ago, Budd Schulberg wrote What Makes Sammy Run, a novel about an agent who lies to get ahead in the movie business. There have been a number of other works published or produced on the subject as well. More recently, I wrote about it here.

Then as now, negotiating is nothing less than a confrontational (and largely, animal instinct-driven) struggle for limited resources. There’s only so much pie to go around and a rep wants the client’s slice to be as big as possible; not just for the deal on the table but to set precedent or the quote for other deals down the road. These precedents greatly influence, if not become the floor to subsequent negotiations, taking into account the project’s budget and vintage of the quote. Agents, managers and sometimes, lawyers have an added incentive since their fees are based on a percentage of what the client makes on a particular project.

It’s only natural then that some reps feel that they have an absolute obligation to their clients (and to their law firms or agencies) to maximize their slice-to-total-pie ratio even if it means lying to the other side about a material term.

I suspect it was that desire that recklessly drove one particular rep to repeatedly lie to me about his client’s quote during negotiations; the first time by more than double the actual quote.

The rep stalled over days when I asked for documentary backup to the quote (a pro forma request usually provided on demand or verbally confirmed by the studio or network business affairs exec who initially put the quoted deal together). And when the days of stalling turned into weeks, I suspected the worst and only pressed harder. He ultimately confessed that he had misquoted the figure and that his client’s quote was really [a number that was about a third more than the actual figure].

I was furious. When I insisted on seeing the prior deal, the rep had the gall to blame me for drawing negotiations out.

The rep’s actions were particularly dumb since a quote is one of the easiest things to verify. When I told the story to R, a manager, former agent and friend, he laughed and said cynically, “he should have only lied to you about things you couldn’t check.”

Ultimately, the debacle left my client with substantially more leverage and the moral high ground to close the deal on more favorable terms.

“So why am I still angry?” I asked.

“Because you caught him lying and had to do something about it.” R said.

This business is based on trusted relationships meticulously built over time. Like deals drafted on a napkin over lunch back in the day, a rep’s integrity and reputation can still go a long way to closing deals faster and on better terms today.

In contrast, lying makes deal making harder; can polarize the parties; and makes the negotiations feel more like protracted litigation. Lying can kill a deal and, even in the best of outcomes, slow things down.

In this instance, we were lucky. The rep’s lies (not to mention the endless delays caused by his stalling) ended up costing our clients only time and money. It cost the rep much, much more.

Chorus Line Dancers Make A New Deal

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Although “A Chorus Line” opened on Broadway over thirty years ago, the dancers who signed away their life story rights as the basis for the musical back in 1974 recently renegotiated the terms of their deal. The dancers originally signed away these rights for $1 each during “workshop” sessions for the musical.

In 1975, Michael Bennnett, the producer, choreographer and co-writer of the book for the show, renegotiated these terms after “A Chorus Line” moved to Broadway; dividing about one-tenth of his own royalties and about one-third of his rights income derived from the show and its subsidiary rights with the dancers. “This kind of arrangement has now become standard, though with less generous terms, for people involved in workshops that lead to Broadway productions,” wrote Campbell Robertson for The New York Times.

Apparently, many of the dancers remained unsatisfied with these terms. For a more complete chronology, read here.

The Bennett Estate’s recent revival of the show on Broadway triggered the renegotiations. The previous agreement only applied to the original Broadway production not to first class productions like Broadway revivals and related road shows. The revival presented the dancers with a unique opportunity to renegotiate. After 16 months, the dancers successfully negotiated an additional (undisclosed) share of revenues in the current production as well as in all past and future first-class productions of the show.

The “Chorus Line” renegotiation provides broader implications to deal making for two reasons:

1. Leverage only comes from immediately recognizing the other party’s needs and fears in a particular deal and then effectively using that leverage in negotiations. Accurately assessing your leverage can be tricky since your own needs and fears are always in play (this is so even if you have representation – e.g., the writers strike negotiations).

Here, the Estate wanted to mount a new production of “A Chorus Line” which required additional permission from the dancers. The original show and subsidiary rights grossed over $280 million. Clearly, the Estate was a motivated negotiator with that much money at stake. Each of the 37 dancers however, was unorganized and had differing agendas. I suspect the 16-month lag in closing this deal was due in part to those detracting elements on the dancers’ side of the equation.

2. We now live in an era of franchised content – “everything old is new again” as the show tune goes. Even early-stage deals (aka deal memos) should be negotiated accordingly with an eye towards future revenues from media not even conceived at the time the deal is struck. If the deal is worth papering, it is worth papering thoroughly. Opportunities to renegotiate may later prove to be few and far between. In this case, it took the dancers over 30 years to get a taste of these revenues. Most people aren’t prepared to wait that long.