Category Archives: The Culture

Talking The Talk

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As in any business, there are terms of art that are commonly used in negotiations in the entertainment business. I’ve added a glossary that defines some of the words and phrases used, devised or overheard during these discussions.

I encourage my colleagues to email me any additions or corrections. You can click “Lingua Franca” on the gray strip above or here to get to the page.

This is a work in progress, so please check often for updates.

The Negotiation Culture: The Approach That (Might Have) Resolved The Strike

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As of this writing, news outlets are cautiously optimistic that striking writers will be able to close a deal with the AMPTP within the next few days
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But what broke the impasse? Writers’ dwindling bank accounts? The studios’ mounting revenue losses? The Oscar telecast? While all of these elements were contributing factors, there’s no doubt that the addition of studio principals to the negotiations made all the difference.

Several weeks ago, Alfredo Barrios, a former corporate lawyer turned writer and WGA strike captain, posted a missive on a pro-WGA blog, unitedhollywood.com urging that studio principals become directly involved in talks in order to restart negotiations. Regardless of which side you’re on, and despite Alfredo Barrios’s obvious bias in favor of striking writers like himself, Barrios eloquently describes the “psychology” of the deal for both sides; a mindset that ultimately required the principals to take the lead in strike negotiations.

The following is an edited version of Barrios’s post. You can read it in its entirety here.

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BASIC RULES
First, understand the relationship between Nick Counter and the studios. It’s essentially a lawyer-client relationship. The AMPTP is run by lawyers like Nick Counter and Carol Lombardini. Think of it as an in-house law firm. Their goal is to “negotiate” deals with unions on behalf of their clients – the studios.

As lawyers, Counter and Lombardi have to justify their paycheck. What does that mean? They have to add value. They’ve promised to deliver a more favorable labor deal than the studios would get without them. Otherwise, there would be no point in hiring them (or more aptly, keeping them around). So our loss is their gain. And the bigger our loss, the bigger their gain.

Now here’s the thing to remember, fairness and reasonableness have NOTHING TO DO with their approach. No corporate lawyer I’ve ever known has ever met with a client and promised to get them the most “fair and equitable deal” possible. That’s not their goal. Instead, they promise to save them a lot of money – remember, added value. If the studios were genuinely interested in reaching a fair and equitable deal, the CEOs and their CFOs would talk directly to our negotiating committee and financial people, and a deal could be reached today – by the way, this is what we’re driving towards. We will know we will have won when the CEOs and their CFOs talk to us directly. [Editor’s Note: as we all know now, this is what happened here].

CEOs hate uncertainty. They run their businesses based on long-range plans that are based on long-range assumptions. So as a lawyer, you do your very best to put their mind at ease when faced with an inherently unstable situation – be it a lawsuit, a takeover deal, or a strike. You say to them, “You don’t have to worry about a thing. We have this under control.” Then you spell out what you believe (more often hope) is the most likely outcome. “We feel confident that we can get this suit dismissed at the pre-trial stage;” “ get this deal closed by Christmas;” “resolve this strike by_______ on ________ terms.” The CEOs nod their heads happily, confident that their well-heeled, well-paid lawyers are looking out for their interests, and then go about their business.

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Going back to CEO peace of mind. This comes in a couple of forms. First, lawyers tell their clients that they won’t have to get their hands dirty. Lawyers will be the bad cops on their behalf. They’ll serve as a shield for their clients. Lawyers always want their clients to feel comfortable – that’s part of what’s promised. “Go about your life. Don’t worry about a thing.” Second, it comes in the form of laying out how things will play out. “You can expect that the plaintiffs will engage in several months of discovery;” “the company you’re hoping to acquire will seek a white knight;” “the strike will lose steam and the writers will fragment.” All things that have a very good chance of happening. And when they do, the lawyer looks like a genius, and his client thinks, “Man, I’m in really good hands. I have nothing to worry about.” It’s about managing expectations.

THE LAWYER’S STRATEGY

Lawyers try to do three things to their adversaries: (1) get them to doubt the validity of their position; (2) undervalue whatever cards they’re holding (in other words, underestimate whatever leverage they have); and (3) kill their resolve.

How does a lawyer get an adversary to doubt his position? Well, in litigation, it comes by spinning the facts. In transactional deals, by spinning the financial numbers. And in a strike situation, by spinning both. One common technique is making a nonsensical argument so many times that it begins to take on the air of a legitimate one and eventually some people (judges, jury, the public in general and sometimes even your adversaries) begin to accept it as truth. Lawyers are masters of this. Think of these doozies: “If the glove doesn’t fit, you must acquit;” “Smoking doesn’t cause cancer;” and my personal favorite, “We don’t have a business plan for or any real revenue from the Internet.” Or how about that $130 million offer that the studios supposedly made us several weeks back? The one that didn’t actually add up. Facts and numbers are spun every day in the courtroom, in the negotiating room and in the press by lawyers.

Now, here’s the thing to remember. It’s the lawyer who does the spinning. No CEO wants to do it. Why? Because so many of them want to be known as “straight shooters” – i.e., guys who don’t lie. Plus, they like to be liked. And going out and spinning facts and numbers… well, that’s like acting like a lawyer. Like Nick Counter. That’s why they hired him to do it. They want to be comfortable. Notably, neither Counter nor any of the CEOs has actually done any real press interviews to defend their position. Not hard to see why: it’s utter nonsense. So they spin in press releases or “leaked” stories that are regurgitated by mouthpiece trade papers and other seemingly “unbiased” but wholly bought off parties.

And how does a corporate lawyer gets an adversary to lose confidence in whatever leverage he has? One way is to engage in positional bargaining. That means anchoring your negotiating position to an extreme and unprincipled number over such a long period of time that your adversary starts to doubt the cards he’s holding and eventually moves off of his number and gets closer to yours. That’s what the AMPTP has been attempting to do with its new media proposals – or actually, lack of proposals. They’ve anchored to basically zero payments for new media in the face of our fairly principled new media proposals. They’re hoping that doubt will creep into our psyche – “Wow, man, those companies are really holding to that number, maybe our bargaining position isn’t as strong as a I thought. Maybe we should take whatever the DGA gets.” And so on…

Once you start down that path, you’re losing your resolve. The corporate lawyer knows you’ll start to rationalize why you should take a really bad deal. And you start to buy into the arguments he’s making – “That lawyer of yours isn’t doing you any favors.” “I hate to tell you this, but you’re wasting a lot of time and energy with this case. It’s a loser.” “As a guy who knows, you should take what we’re offering you because it’s not going to get better.” Sound familiar? It’s the sort of stuff being put out by the AMPTP’s PR guru, Chris Lehane, who, by the way, is also a lawyer – and a classmate of mine from law school. Small world, huh? Couple this psychological warfare with the increasing expense of fighting… and people will crack.

Posture and overwhelm with superior power – or the semblance of power. That’s Corporate Lawyering 101.

So… how do we win?

OUR STRATEGY

In my experience, the guys that win against corporate lawyers and their clients – and believe me, I’ve seen it happen – are the guys that (a) never lose sight of their cards – in other words, aren’t fooled into believing that they’re holding garbage, and (b) play lots of offense.

I’ll begin with playing offense. That means taking the fight to the other guy’s client – the decision makers – the CEOs. Remember, THEY LIKE TO BE COMFORTABLE. That’s what their lawyer promised them they would be. So how do you take the fight to them? Well, in litigation, you bring them into the game by making them the target of discovery – you depose them, go through their papers, ask them all sorts of question. You take them out of their comfort zone. You make them the focal point of the case… they’re the bad guy. In transactional matters, say a takeover attempt where you represent the buyer, you go after the “entrenched management” that wants to deprive the shareholders of the real value of their holdings… they’re the bad guy. In a strike, you hold the CEOs accountable. Why? Because they are ultimately the bad guys… the buck stops with them, and they need to be reminded of that always. Counter is just their hired gun.

And by taking the fight to them. I mean, maintaining picket lines at the studios at peak levels, relentlessly picketing locations, continuing to put out creative videos that entertain and inform people about the strike, denying waivers to award shows and picketing those shows, seeking alternative ways to put out creative work on the Internet for pay, etc.

Playing this kind of offense serves a couple of purposes. First, when a CEO drives through the studio gates, or hears about how a location shoot was impacted by picketing (like for example, when an actor leaves the set or a day has been added to the schedule), or sees how his untenable bargaining positions are being ripped apart on websites, or is told about how his award show is falling apart, or reads how Google is about to form a competing entertainment powerhouse, it all collectively begins to call into question the promise that Counter made – i.e., that we would crumble. It’s a daily reminder that we are not losing our resolve. It makes him worry. His expectations aren’t being met. Things are uncertain again. And it begins to chip away at Counter’s credibility as the guy who could resolve the strike with minimal inconvenience to the studio CEOs.

This last point is important. Why? Because the way you win is by taking the lawyer out of the equation. Deny him the promise that he made to his client – i.e., that he would add value by battering all of us down. Once the CEOs begin to believe that we’ll stick to our guns until we get a fair and equitable deal, that’s when we’ve won. That’s when the CEOs and their CFOs will step in and begin to deal directly with us. Why not Counter? Because his job wasn’t to deal with real and fair numbers; it was to screw us. Once he fails at that, it’s time for others to step in. Trust me, it happens.

But it requires believing in the cards you’re holding – your leverage – and sticking it out. The bigger the show of resolve, the faster the CEOs will dispatch Counter. As profit losses mount and their share prices take bigger hits, the studios will realize that holding out for Counter’s promise looks increasingly like a fool’s game.

But the CEOs will only step in if they believe a fair a reasonable deal can be reached. That’s why it’s important to always maintain principled bargaining proposals on the table – as I believe we have throughout. Unlike Counter, I don’t believe we’re engaging in the positional bargaining. Having said that, I think we made one very serious mistake in continuing to keep our DVD proposals off the table. Bad faith bargaining – like the type that Counter has engaged throughout – can never be rewarded, and I have heard no compelling reason to keep our DVD proposals off the table.

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As for acting like “nicer” and “more accommodating” guys and gals… Well, let me just say that in all of my years as a corporate lawyer, “nice” and “accommodating” adversaries who never stuck to their guns and didn’t bring the fight to us never got better deals. They only get worse ones. So don’t buy into the our leadership’s too militant line of argument. They’re not. They’re being appropriately tough. Trust me, you wouldn’t want it any other way. Now it’s up to the rest of us to hang tough with them.

The Negotiation Culture: When Is It OK To Lie?

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A literary agent recently lied to me during a negotiation. Anyone who negotiates for a living; indeed, anyone with any meaningful time in the business might find that unremarkable. But the truth is, the entertainment business, like many businesses, is built on trust. It’s ironic then that no one would be surprised by my complaint even though everyone knows that trust is the currency of the realm.

Without trust between the parties and between their representatives “the deal won’t make.” So in every negotiation between reps in the business or kids on the playground, there is an implied agreement to negotiate in good faith regardless of the leverage you have in the deal. The law makes this assumption in many jurisdictions as well. Sure, hard ball negotiations and bluffing are fair game but even reps have a common code of conduct without which the whole idea of deal making would not be possible.

The deal closed last year and my client, let’s call him “Producer,” wanted to renegotiate some of the terms before the option lapsed. However, time was running out and, barring renegotiations, Producer needed to come up with some serious coin to pay Writer or risk losing control of the screenplay.

The agent, a young turk in his 20’s (let’s call him “Agent”), went out of his way to protect his client the “Writer.” This impressed me (my client, not so much) because even though Agent was creating greater difficulties for us, no one could blame Agent for doing right by Writer. Too many agents when faced with the choice of being loyal to the deal or to the client, pick the deal. It never occurred to me that he might not want the deal at all because AGENT WAS NEGOTIATING WITH ME; even giving me more time past the option payment deadline to renegotiate the deal.

Negotiations continued over several days and Agent agreed to the new terms subject to Writer’s approval. Agent PROMISED to get back to me no later than 5 pm. It was the last day of the extended deadline and even though I technically had until 11:59:59 that night, it was a Friday and for all practical purposes, the deadline was really “the end of business” that day. Agent was in New York so a 5 pm deadline there would still give my Producer in LA time to strategize if things went sideways; which of course, they did.

No call at 5 pm New York time (no big shock).

I followed up at 5:30 but Agent’s assistant told me Agent was in a meeting and could not come to the phone. I emphasized the importance of hearing back from Agent ASAP.

I followed up at 6:30 and got Agent’s voice mail. Apparently, Agent had left for the day without the courtesy of calling me back (how do these guys make a living on banker’s hours?). I called Agent’s cell phone and left what can only be diplomatically described as a “terse” message on his voice mail.

I updated Producer and discussed the possibility that Agent was ACTUALLY DUCKING me. Agent was young and inexperienced so maybe he wasn’t ducking; maybe he was just flaking on me. An interesting but still unacceptable alternative. Ducking me was dumb because it exposed Agent, his agency and Writer to a possible law suit for acting in bad faith, among other things. Flaking on me on the other hand, was merely unprofessional and rude.

I called Agent’s cell phone several more times; the last time my call went straight to voice mail without ringing at all. When a call goes to voice mail without ringing, you know that the person you’re calling turned their phone off. This meant that Agent was picking up my messages or at least knew I was calling him – a lot.

After several more confidential discussions, Producer decided to pay Writer and drove over to the agency with check in hand (not an easy task during a Friday rush hour in LA).

Later that evening, Agent copied me on an email to Producer in which he acknowledged that he had, indeed, been ducking me. I text-admonished him that the only thing anyone has in this business is integrity; and that I was disappointed that Agent lost his so easily, so carelessly and so early in his career. His response is irrelevant, but predictable.

If the Agent wanted Producer to comply with the original terms of the agreement or even move on without Producer, the better course would have been for Agent to simply demand the original option payment by the end of the day or threaten to walk from the deal.

It’s hardball but at least I could trust him to do what he said he was going to do.