clive

It can be a useful source of bargaining power to use experts on your side in a negotiation. Clearly they are there for their expertise, not to make decisions for you but I would query whether it is always best to take them out of the negotiation at critical points.

Some people, such as Mark Suster in this article (businessinsider.com) express the view that using 3rd parties to negotiate on your behalf should be restricted to a minimum so that you can keep control of your deals. It is true that often we as the decision-maker will have more at stake than the expert does. It is also true that for that same reason we might handle the negotiation differently than they would. However, their detachment can actually be an advantage. Often when our personal interests are at stake we invest the deal-making process with too much emotion. This can cause us to get anxious or aggressive or inhibit us from making decisions. As a result we might end up over playing or under playing our hand.

When we use experts their lack of emotional involvement can be an advantage. It can cause them to view matters more calmly and dispassionately in the heat of the negotiation, enabling us to make better decisions when they refer matters to us for instruction.

Although it’s early days, it looks as though Apple might be eyeing up the purchase of US online video service Hulu. If this deal does eventually happen, it might be a good way for Hulu to side-step the negotiating problems with UK rights owners which have bedeviled their launch in the UK.

By selling out to Apple they would pass that problem on to someone else – a giant with great negotiating strength that is used to securing worldwide clearances on good terms, even from major content owners.

There may be a price for Hulu to pay, though. For Hulu, the absence of such clearances presumably reduces the valuation of the company somewhat, because it reduces the scope of their existing offering. Of course if the deal actually happens, the position changes, because for Apple the ability to procure UK clearance is effectively negotiating “coinage”. It’s easy for Apple to bring to the table, like loose change. Apple then benefits from the increased valuation of Hulu once the clearances have been obtained, so they potentially benefits from the UK position both before and after the deal. I believe this is called having your cake and eating it….

It is very difficult to see a deal not being struck between Republicans and Democrats over the US debt.

The consequences of failure to reach agreement (the US will default on its financial obligations on Tuesday if the debt ceiling is not raised) are just too great for both sides and the country. Public spending would apparently come to a halt, the US would find the dollar and its credit rating status under great pressure on the financial markets, and interest rates in the US would almost certainly rise.

Set against this scenario (sometimes referred by negotiation academics as a WATNA, or Worst Alternative to a Negotiated Agreement) almost any kind of deal would be better. So, expect some kind of deal to be cobbled together. It may be a fudge, it may be short-term, it may not do enough to satisfy the financial markets that the US has the answer to its crippling debt burden, but it will buy the US some time. As the successive fudged deals on the Euro have shown, that is a result in itself. Compared to the chaos of no deal being done that will ultimately seem a more attractive option to both the Republicans and Democrats.

I read last week in the Telegraph online (here) that PayPal has agreed to act against Russian and Ukrainian websites offering unlicensed downloads, by cutting off their flow of payments from visitors. This got me thinking about the methods which the IFPI and the record labels have so far used to clampdown on piracy within the music industry.

There are two ways of motivating people to do what you want. One is to move them away from actions or beliefs and the other is to move them towards what you want.

When you try to move people away from a certain course of action then inevitably you find yourself focusing on more negative approaches – using pressures, or threats, or denying them access to something. This is the approach which IFPI and the record labels have used in their anti-piracy campaigns against illegal downloaders. Litigation against peer to peer services, litigation against consumers, campaigns to get ISP’s to shut down access to illegal sites, and now getting payment providers to withdraw their services to illegal sites.

This is I suppose understandable in the face of the wholesale piracy the Industry has had to face, but only if it is also part of a larger and greater campaign to incentivise consumers towards the kind of legal behaviour which IFPI and record companies want to bring about. There are still less than 500 legitimate licensed services worldwide, which is not enough to tip the balance of consumers’ behaviour in their favour. Seemingly, record companies do not spend enough time strategising on how to deliver to consumers what they really want and talking directly with them about what would incentivise them to behave differently.

The result of […]

Looking at the findings of the white paper from Nielsen/Midem on the state of music streaming across European markets I believe the greatest obstacle to the take-up of streaming services is really their lack of general availability. The reality of the stats highlighted in the report is that penetration is low because very few streaming services have been licensed.

We all rely on a kind of social conformity which encourages us to try new things and so the lack of availability is a genuine constraint. This lack of availability is partly down to the difficulty in getting such services licensed, because content owners demand high advances, minimum guarantees and per stream minima. The result is that very high barriers are set for new entrants to the market place.

Contrast the way that handset manufacturers and mobile operators set about building the mobile market. They made it as easy as possible for consumers to get started – pay as you go model, free devices, regular upgrades, the whole momentum was towards growing the market. The net result was that more and more users wanted mobile phones, until their presence became ubiquitous. Mobile operators didn’t set out to charge the highest possible prices to as few users as possible, as that would have stifled the growth of the market.

So, when considering licensing streaming services content owners could consider the example of the development of the mobile market. When they do so, the penetration stats on streaming might start to look more impressive.

BT have announced plans to offer a music streaming service to their customers, although these plans seem a bit vague as it doesn’t know when or exactly what the service would look like.

Is this just positioning with the UK government so that it looks like BT is making a positive effort to drive consumers towards legitimate services? This would be understandable in a context where ISP’s are under pressure to do more to prevent illegal downloading by shutting off access to websites providing uncleared material.

Let’s give them the benefit of the doubt and assume that this is a genuine initiative. From a deal-making point of view they face some familiar hurdles. Firstly it is notoriously difficult to get clearance for this kind of service from content owners – both record labels and publishers. The complexities and delays involved in agreeing issues like pricing and guarantees drove Virgin Media to abandon its plans to set up its own streaming service and instead do a deal with Spotify to host their service. BT would face similar issues.

Secondly BT would face challenges negotiating for the attention of its own audience in relation to such a service. Technology companies like BT are not naturals at creating content-led services for consumers – the slow progress of BT Vision attests to this. It is as though they need someone else to provide a “managed service” to craft a content offering, leaving BT free to market the service to its customers.

So, whichever way you look at it, there is a long way between BT saying it wants to develop a music service, and such a service being successfully launched.

Recent reports here (uk.Reuters.com) suggest that Nokia are in free-fall and their their problem may well be that they are no longer sure what constitutes a “win” in their ongoing negotiation for consumer attention. Their aim has traditionally been to occupy the number 1 position worldwide. But that position has now been undermined in the smart phone market and looks to be under threat in relation to the overall handset market.

What should they do? The Nokia tie-up with Microsoft suggests a continuing pre-occupation with achieving greatness through scale. But though they are big, neither Apple nor Android have made progress on the Smartphone market by focusing on being number 1. They focused on creating superb technology and let their market position take care of itself.

Maybe Nokia should go back to basics and concentrate on creating the next generation of technology for smart phones? Or focus on its existing customer base and create a peerless reputation for customer service? Or focus on price ahead of quality and become price-leaders? Any of these options offer alternative ways of taking forward the “negotiation” with consumers.

Perhaps the one mistake would be for Nokia to presume that the only way to get a win from the negotiation is to “get back to number 1”. That would be to put the desired outcome ahead of the negotiating strategy for getting there…

It’s great when you have two suitors and their fear of losing you means that you can end up having a relationship with both of them. That’s what happened in the recent Formula 1 UK television rights negotiation.

F1 has considerable bargaining power in these negotiations because it alone can provide access to televised F1 races. This kind of exclusive access to a network, or “network power” is extremely powerful in negotiations. It will have induced both Sky and BBC to bid aggressively for the rights, with each needing access to that network to enhance their own profile (in negotiating terms, each of them having a “belonging need”).

The masterstroke by F1 has been to be able to satisfy that belonging need of both BBC and Sky at the same time by parceling up the rights in each way. Sky gets the full package of rights to F1; BBC gets a reduced package – enough to make it feel it still has adequate access to the brand, but not enough to prevent Sky paying top dollar for its own package.

Further, the reduced rights granted by F1 to BBC enables them to meet another negotiating need at the same time – that is to save money (a “reassurance” negotiation need). Small wonder that the BBC statement welcoming the deal refers not only to the triumphal fact that in large measure F1 will still be available to licence fee payers, but also to the fact that as a result of the deal the BBC has achieved “significant savings”.

F1 of course benefits all round, and the deal certainly meets Bernie Ecclestone’s almost insatiable “achievement” needs. F1 gets much higher audience reach through dealing with two UK channels, […]

As predicted by this blog, a fudged deal got done by Republicans and Democrats in order to avoid the potential disaster of a US debt default. It was inevitable that this kind of arrangement would leave everybody equally unhappy. Not enough has been pledged as a cut from the debt either to satisfy Republicans or financial markets scrutinising the probability of future US debt crisis.

The reaction of the markets since the announcement of the deal tells you everything you need to know about their ongoing concerns. For the democrats, the concern is that too much has been promised by way of cuts, which will affect a whole host of social, health and welfare programmes, hence the wave of criticisms directed at Obama by his own party.

One thing that was noticeable about the negotiations was that they were conducted in a very public manner – with each party declaiming its position repeatedly to the media. This kind of public negotiation makes it hard for parties to step away from their adopted positions for fear of losing face. Negotiations that take place behind closed doors give all sides much more flexibility.

The other problem is that both parties seemed to use exclusively “push” negotiating behaviour focused solely on their own agenda. So there was a lot of “stating of expectations” and “proposing with reasons” as each side sought to justify its own position. Each side used the deadline “pressure” tactic to try and force concessions out of the other. Each side relentlessly “tested and probed” the other side’s negotiating position.

“Push” behaviour has its place in the negotiating repertoire, but it is never enough on its own. Other behaviours need to be mixed in: Some […]

As ever, this Dragon’s Den episode provided an array of examples of how to negotiate a deal – and how not to negotiate one.

First-up was the Rascal Dog Litter Box. No points on negotiating skills for Minah from this team who seemed unable to keep quiet at any point in the discussions. Good negotiators know that listening is far more important than talking when negotiating – generally the more you say, the more you give away. Her husband did not fare much better, as he seemed to have no grasp at all on the numbers for his business. Was that £100k turnover he was forecasting for next year? Or £200k? Or £30k? All these numbers were mentioned. Fail to prepare for any negotiation and you prepare to fail – and knowing the numbers for your own business is a pretty basic preparation requirement.

The next interesting example was the Hart family’s fancy dress business. They did well in that their franchise model for expansion attracted interest and an offer from Duncan Bannatyne. He made an offer of £100k for 60% as opposed to their proposal of £100k for 10%. This was a fairly drastic reduction in their valuation. It would have been sensible for the Harts therefore to have taken a break and decided what to do next. Taking a break is always a good idea when you are under pressure in the bargaining phase of a negotiation. Instead the Harts ploughed on even though they clearly had not prepared for this turn of events. The husband uncertainly said that they wanted to keep at least 50% of their own business – a massive shift in their position. The wife undercut him and said they […]