Monthly Archives: May 2011

It’s one of the problems of a negotiation where the bargaining phase is drawn out over time that the value of what you are negotiating over can change. If there is a gap between the bargaining phase and the closure phase then the value may go up or down. This can be because of economic factors, changes in personnel, or, as in the case of BSkyB’s potential deal with News Corp, a change in the underlying value of one party or the other.

Normally it’s advisable to get to closure quickly once it looks like there is a deal to be done in principle, for precisely this reason.

It’s difficult to see how this could have been done in the instance of the BSkyB deal though. There was always going to be a big gap before closure was possible because of the need for the competition law issues to be resolved.

Sky’s recent announcement of increased profits and customer numbers (see article here) will inevitably raise the value of the company. The consolation for Murdoch is that as Sky’s value increases so does the value of the percentage of Sky that Newscorp already owns…

Last week it was rumoured in Music Week (here) that deals may be in the pipeline for both Apple (signing licensing deals with the Major labels for their Cloud-based iTunes service) and Google (forming an alliance with Spotify to provide their own music streaming service).

Looking at the motivations which may underlie these potential deals, it’s easy to see why Spotify might want an ally to effect rapid entry into the US. Utilising Google’s negotiating strength might help lower the cost of licensing deals which must be a pressing (reassurance) negotiating need.

It’s also clear that a Google/Spotify deal could suit Google, giving it instant clout in the subscription streaming market to help with its own (achievement-based) negotiating needs.

From Apple’s point of view a cloud-based streaming service would also give it a significant place at the subscription table, which might allay its concerns about the vulnerability of its itunes ‘a la carte’ downloads service as streaming services grow in importance (a reassurance negotiating need).

From the Majors’ point of view, streaming deals with mighty players such as Google and itunes may still be seen as the path to digital salvation (a survival need). However, it remains to be seen whether this is really the case. So far, take up of subscription services has been slow, and by focusing on deals with only the bigger players such as itunes, Google and Amazon, the Majors put themselves in negotiations with parties who are much bigger than they are, and wield a lot of negotiating clout. This has not always worked for them in the physical world (think for example of the tough terms a major player like Tesco is able to impose on them).

Maybe a better route […]

I tend to agree with the view of former US Trade Representative Susan C. Schwab here (foreignaffairs.com) that rather than trying to revive multilateral trade talks, world leaders should instead be focusing on salvaging smaller regional agreements.

One of the problems with multinational negotiations is that they involve so many countries, with many different negotiation needs, so it is very difficult for all the parties to reach a consensus on a common set of issues.

It may be easier to reach a set of regional agreements between countries with broadly similar issues, which could then be linked up in due course to try to achieve a global result. It might also give the process of reaching global accord some forward momentum, and narrow down the range of issues which need to be agreed at an international level…

This could be an interesting negotiation. I can see why News Corp might want to buy the rights – exclusive sports rights have been very helpful in driving TV subscriptions in relation to soccer, for example.

I can also see why Exor could be interested in getting involved as, apart from any other financial benefits, it could provide a way for Ferrari to influence negotiations over commercial revenue splits from the circuit, which currently go through Bernie Eccleston’s F1 Management Company. Those rights are due to be renegotiated within 18 months.

As for CVC Capital Partners, like any VC they might just be looking for a profitable return, having held the rights for some 7 years.

Bernie Ecclestone himself might well have a different view as is suggested by his early comments dismissing rumours of a sale. His motivation is different; Formula 1 provides a major part of his purpose in life and he won’t be keen to let that go. Would he be in a position to stop it though?

Add in the extra ingredients of a possible competition law referral if a sale progresses and a looming German court case over a bribery allegation from the last sale in 2005 and this could be a fascinating negotiation to watch. There could be plenty of car crashes ahead…

Source articles here (Eurosport) and here (autoracingdaily.com)

An understanding of non-verbal communication is a key element in effective negotiation – the statistic that only 7% of the meaning of what we say is conveyed by the words, is often quoted. People often don’t mean what they say in negotiation, so if you understand non-verbal cues you can work out what is going on behind the words being spoken.

Equally, non-verbal indicators are only clues as to what is going on; they are not determinative all by themselves. If someone leans forward that may mean they want to get the deal done or it may mean that they are “pushing” to get their own way. You have to put individual pieces of non-verbal behaviour into context to build up a picture of what may be going on.

Non-verbal cues are particularly important for spotting the way people are thinking. You can sometimes tell from their language and the way they move their eyes whether they work off visual cues, auditory cues, or emotional cues. People who look upwards a lot when they think may be working visually, people who look sideways may be working off auditory cues, and people who look down may use emotional triggers.

If you can work this out, you can utilise language which is likely to influence the other side in a negotiation because it triggers the cues which inform their thinking process.

In response to the article ‘Actions speak louder’ by Mike Utting (supplymanagement.com)

Having tried to use the Greek crisis as leverage for a change in the terms of their bailout deal, Ireland are now looking to the UK for support by renegotiating their bailout interest rates with them (article here).

Ireland does have some extra bargaining power in negotiating with the UK that it doesn’t have with the rest of the EU. The proximity with the UK and the wide range of close governmental ties gives Ireland some “Network” bargaining power – special access to a powerful network. Ireland also has some niche marketing power with the UK by dint of being such a significant trading partner.

The UK can ill afford Ireland to default on its loans and this reassurance need can be exploited by the Irish – who can blame them for trying to make the most of this during the Queen’s visit. However the UK rate of interest is pretty close to the average EU rate of interest being charged to Ireland. So, whilst it’s plausible that Ireland may squeeze a minor interest rate cut out of the UK, it’s unlikely that the UK rate will be dropped below the EU rate, which will probably mean that the EU is not put under serious pressure to reduce its own rates to Ireland at the moment.

It was inevitable that whichever coalition partner lost out in the AV vote would be put under pressure by its members and MP’s to take a tougher line with the other. From the Lib Dem point of view, a number of members must be questioning whether the coalition is now worthwhile. They are perceived to have made some unpalatable compromises in order to join and maintain the coalition, and now the prospect of voting reform, which was their holy grail, has been removed.

From a deal making point of view though the difficulty for the Lib Dems is “what is their BATNA” – their Best Alternative to a Negotiated Agreement? If they leave the coalition and cause an election now at their current low ebb they may well be penalised at the polls. Is that a better alternative than sticking it out, in the hope that the economy improves and they finally get some credit with electors for the improvement? I would expect the Lib Dems to pursue the latter option, but be noisier about disagreements such as this one on overseas aid, so as to try and create some ideological distance from their coalition partners going forward…

Following on from the successful takeover of Warner Music by Access Industries, It is rumoured that its owner Len Blavatnik may be interested in buying EMI as well and merging the two majors.

From a deal-making point of view with the EU, the competition issues are much less decisive than they would have been 5 years ago owing to the weakened position of Warners and EMI as Majors. So, the fear for the EU of making a “wrong” decision (a reassurance negotiating need) would be much less.

The other issue about the merger is whether it would make much difference to either of them in practice. The Majors may well continue to be in a position where they simply manage decline unless they are prepared to liberate and expand the digital market by granting many more licenses (see last week’s report on copyright reform from Lord Hargreaves which made just such a point and urged the creation of a digital rights exchange to speed up licensing).

So, President Obama has endorsed the Palestinians’ demand for their future state to be based on the borders that existed before the 1967 Middle East war. Will this move us any closer to a negotiated agreement? Unfortunately, I fear not.

As I’ve said before, all efforts regarding Israel and Palestine should be aimed at getting both parties in a state of mind where they are willing to do a deal. Until that point, debates about whether to do a deal based on pre-1967 borders or any other proposed compromise are irrelevant. I don’t know why the US can’t see this, and insist on orchestrating processes and proposals which won’t get anywhere. Israeli’s and Palestinians have to get to a point where they feel that peace is better than war.

So, all efforts should go in to demonstrating that the benefits of peace for them and their children outweigh the benefits of being at war. Those benefits include stability, less violence, economic prosperity, educational progress and acclaim for sorting out a historic deal. What would stop the US funding economic co-operation between Israeli’s and Palestinians for example? As the history of the EU shows, peace can more easily be based on the prospect of economic progress than territorial deals.

In 1918 the Versailles treaty tried to impose territorial and other restrictions on Germany and within 20 years the world was at war again. In 1948 the first step in setting up the EU was a trade agreement – a European coal and steel deal. The EU has prospered based on its trade ever since and the desire to preserve that benefit has encouraged the Western European nations to maintain peace among themselves for nearly […]

It’s not difficult to see the negotiating motivation for HMV offloading Waterstones (see article here). They are in “survival” mode as deal makers, suffering repeated profit warnings and severe contractions in the markets for CD’s and DVD’s. Selling Waterstones buys them some time to restructure their debt and search for alternative options to arrest the decline in sales or build new product ranges (eg technology products).

It’s less obvious what the motivation might be for Alexander Mamut. Physical book sales are at the beginning of the same sort of cycle as music has been through, where mass digitisation creates pirated sales, or drives sales online to generally cheaper outlets like Amazon. In this context a labour intensive, physical offering via the High Street, with all the attendant costs of retail space and distribution, looks like a bit of struggle going forward – anyone remember when Zavi bought the Virgin music retail shops a few years ago in similar circumstances? Zavi went bust not long afterwards.

Maybe Alexander Mamut is one of those negotiators who relishes achievement, and has a high need to do innovative and groundbreaking deals – in which case acquiring a physical books chain to turn round in the teeth of irreversible market decline should suit him nicely….