Category Archives: Guilds

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.

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[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!]

Quantum Mechanics

Pipe Wrench courtesy of Scott Arch

Despite all of the self-help books preaching the contrary, people have a hard time living outside the moment. So, it’s difficult for them, let alone a whole industry to shake the mindset that the current ecology of the business will continue to be bleak forever. But this sour economy is just a part of a normal business cycle which will pass.

Eventually.

If we’re willing to wait. And survive while we’re waiting.

Will the business be the same? I doubt it. It will be continue to evolve as it always has in the film business. A decade ago, insurance-backed financing was all the rage. Then came sale-lease back deals from the UK, investment from German film funds and most recently, private equity and hedge fund financing. Those were good times. Good times.

However, dramatic, paradigm shifting change – the kind of change required to modify an outmoded, global business model created decades ago and move entrenched players with special interests – requires what Nassim Taleb calls a Black Swan event. Like a rare black swan, nothing less than an impropable sequence of events like limited access to credit, labor unrest, rampant piracy, the rise of the Internet and the collapse of distribution windows and the pre-sales market can bring about meaningful change to this business.

Even so, the fundamentals of the film business remain. People like good movies, especially those with good stories and high production values. And there remain untapped distribution channels in emerging markets and emerging technologies. Where there’s a demand for something, there will always be a business.

Bill Mechanic, a key player in the studio world and now, the independent movie business put it best in his keynote at the IFTA’s annual Producer’s Conference back in September:

The independent world, which should be aiming to do things better and different from the studios, doesn’t have that as a mandate at all. If anything, the only thing that independent distributors and financiers look for is the same. Maybe costing a little less than the majors, but they want what the studios want, or in Fight Club-speak, they want copies of a copy.

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

In that way, Hollywood in the broadest sense of the word is much like Detroit. It’s a manufacturer’s mentality that reigns, seemingly indifferent to the consumers it serves. Ignore whether the consumer likes our product as long as they buy it.

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The next 2-3 years will be even worse, not because of the flood of new releases, since that is already abating, but rather due to the effect the over saturation has had combined with the economic downturn. New money is going to be hard, if not impossible to find. Ad sales are down, so TV networks around the world, other than cable, aren’t buying. Add in a confused video market, and it’s going to be tough. To my mind, the next few years will be about survival.

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

. . . [A]lot of waste is going to be cleared from the marketplace. Excess product will go away, the people who don’t take the business seriously will go away. Hopefully those who make crummy movies will also go away, but that may just be a personal wish.

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

[The film business] is a game for winners. And those who win today will win to an even greater extent than at almost any point in the past. . . . Those who will win will be smart about what they make and how they sell their films. They will hopefully make good films but perhaps even more key they will make unique films that stand out, which means they will not have to compete against the bulk of the films for talent. They won’t look like all the other films so they won’t have to spend as much money marketing them.

It’s not that the buyers aren’t there. Consumers, TV outlets, retailers and, yes, even pirates want what works. Don’t believe me? Ask Summit about Twilight. Ask Searchlight about Slumdog Millionaire. Ask Screen Gems about District 9. Ask Focus about Coraline.

The takeaway? To get through this down period, be good, be different and as Tim Gunn says, make it work!

To read the complete transcript of Bill Mechanic’s keynote speech and some really informative reader comments click here to Nikki Finke’s blog.

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.

SAG’s Thaw

"Fire & Ice"  courtesy of Nathan Harper

Variety‘s Dave McNary reported that the Screen Actors Guild’s national board just approved a tentative two year deal on its film-TV contract, triggering a ratification vote by the guild’s members on June 1st.

As McNary writes in today’s Variety:

Should the deal be approved by members, it will extinguish what’s been a nagging uncertainty for the business for the past year. Production on film and TV was thrown off-kilter by the writers work stoppage, then by studios’ and nets’ fears that a SAG strike might emerge. During the period of uncertainty in the fall, control of SAG’s national board shifted to a moderate coalition, while the economic crisis helped create a big slowdown in local feature production. (First-quarter off-lot activity in Hollywood was at an all-time low.)

The terms of the new deal are generally the same as those the networks and studios agreed to with the WGA, DGA and AFTRA. That means that all of the guild’s protracted stang und drum sturm und drang was a waste of time and may have even hurt SAG’s chances to assert jurisdiction over all television programming.

SAG and AFTRA have joint jurisdiction over dramatic television and most television actors are members of both unions. The networks saw an opening and took it by entering into TV agreements with AFTRA instead of SAG. For the first time in 30 years, AFTRA split from SAG and negotiated its primetime contract without SAG. By doing so, the networks scored a twofer by fostering discord between and within each union and averting any threat to TV production during a strike.

Effective negotiating requires unity between and amongst the rep and the represented. This is all the more so when the represented are a large number of people (in this case, 120,000), each with different goals, motives and fears.

Group dynamics assumes that there’s always going to be dissent amongst a large number of people seeking a common goal. The WGA had similar difficulties during their negotiations with the AMPTP. However, a large group still requires a broad coalition of support before it embarks on any negotiation. In this case, SAG’s current board came to power in the middle of these negotiations and only holds a slim majority.

Given that, infighting between guild factions doomed these negotiations from the start; drawing off much needed focus and consensus away from the negotiations and towards addressing dissenters objections to the point of distraction. The AMPTP likely concluded that the best tactic for them was to stay largely mum lest they provide guild factions with any common ground on which to unify.

And now that SAG’s national board has approved the deal terms, it’s still far from over.

In the weeks to follow, SAG president Alan Rosenberg and his MembershipFirst faction have vowed to continue their opposition to the current proposal in an effort to get as many no votes from SAG members as they can. Although the consensus is that passage of the current proposal is all but assured, Rosenberg and company are reportedly setting the stage for next fall’s election of SAG’s leadership. This tactic has already proven to be self-destructive and will accomplish nothing other than to further weaken the union and any chance it may have at unification.

As it is, SAG should have postponed negotiations until it developed consensus within its membership and its leadership. Common ground is the cure here. This isn’t Monday morning quarterbacking; it’s common sense.

Expiration of SAG’s new agreement concurrent with the WGA, AFTRA and the DGA’s agreements was one of the most important concessions the guild was able to obtain from the studios. With all the creative unions’ deals expiring at the same time, they’ll be strength in numbers and an opportunity for a unified front based on a set of common goals. Although many SAG members believe they may have lost this battle, with that kind of formidable alliance, SAG may ultimately be in a position to win the war.