Tag Archives: amptp

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!]

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.

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

negotiator-lbv.jpg


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
.

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.