Convergence NegotiationIn my forthcoming book on the modern art of negotiating, “The Yes Book” I talk about a number of social trends which are combining to make skilful deal-making more important than ever.

One of these trends is “convergence”, the phenomenon by which technology melts the boundaries between different sectors and different parts of a supply chain so that everybody can compete with everybody else. In the old days there may have been a clear distinction between manufacturers, wholesalers, distributors and retailers in different sectors but technology means that is no longer the case. This means that companies have to be able to negotiate more effectively with partners – both to defend their own patch and to take advantage of the cross sector opportunities which convergence opens up.

Consider, for example, the Media sector where the impact of convergence is particularly clear. Here are some examples – notice how the opportunities all revolve around the ability to create deal partnerships which would not have been relevant prior to the current technology revolution. Good negotiation is at the centre of success or failure in responding to convergence.

(A) Advertisers are becoming content owners…

Red Bull is a good example of this.

Felix Space Leap Negotiation Red BullThey endorse a series of ‘extreme’ sportsmen and women and create branded content around that – viral You Tube videos, tv adverts or special one off programmes/stunts.

Whether it’s Robbie Maddison attempting to backflip across London Bridge on a motorbike (in July 2009) or Austrian daredevil Felix Baumgartner skydiving from the corner of space (24miles up) and freefalling at the speed of sound (in Oct 2012), two things are always present with the associated video content:

1) The equipment and surroundings are heavily branded with Red Bull logos
2) There is always an element of danger or ‘wow factor’ to the action (something that is synonymous with the Red Bull brand).

Red Bull has signed a deal with Halogen TV, which reaches viewers via cable with a message of positive change. It also recently released a feature film, The Art of Flight, featuring a group of snowboarders attempting a series of life-threatening ‘mountain drops’ in different locations. The movie cost a reported $2 million to make, but when it hit iTunes in 2011, it was at the top of the charts for more than a week — bringing in $10 per download.

The company also publishes a print magazine — The Red Bulletin — with a distribution of about 5 million.

(B) Broadcasters are moving into broadband and telephony…

BSkyB are a great example of this.

BSKYB Broadband Negotiation DealOn 1 March 2013 BSkyB agreed to buy the fixed telephone line and broadband business of Telefónica UK, trading under the O2 and BE brands. The company agreed to pay £180 million initially, followed by a further £20 million after all customers have been transferred to Sky’s existing Broadband and telephone business.

Sky Broadband also revealed in its financial results to 31st March 2012 (Q1), that it managed to add a further 212,000 new home broadband subscribers during the first quarter to reach a new total of 3,863,000.

Separately the operator also managed to add 220,000 new telephony customers, which took their total to 3,627,000. The number of customers with a combined TV, broadband and telephony (“triple play“) service bundle is now 3.2 million (up 24% year on the prior year), which represents 31% of their total customer base.

(C) Mobile networks and fixed telephony providers are becoming aggregators of content…

O2 England Deal NegotiationAn example is O2’s ongoing sponsorship/partnership with the England Rugby team. As part of the deal, O2 provides exclusive mobile content of the team (behind the scenes footage to customers) and also gives special 3D screenings of all England matches so people can watch the games on the big screen. ‘Blue Rooms’ also provides music and entertainment to customers at the games themselves before and after matches.

Equally, Orange provides free Sky Sports and music streaming to its customers. The network offers access to Swapable services including Sky Sports Mobile TV, Freeview TV channels and music-streaming service Deezer to customers on Panther, Orange’s top tariff. Each option is called a Swapable, because you can choose two at a time then swap and change each month. At the outset of the offering, Panther customers were the only people in the UK who got to use Deezer Mobile and stream or save music on their phone, choosing from 13 million songs, without adverts, for free.

Then there is BT which agreed to pay the Premier League an eye watering £738 million to acquire access to Premier League soccer – and that is for rights to just 38 matches per year.

BT Vision plans three sports TV channels and pay-per-view for Premier League football having also sourced rights for Premiership rugby and other European football rights. BT is not stopping there – it effectively wants to be a broadcaster too. The Financial Times reports that BT wants to offer programmes in the old style of popular BBC shows like Grandstand and Rugby Special. BT Vision has also joined forces with YouView, launching its own BT Vision content on top of the standard on-demand, internet TV offering from YouView.

(D) Online content aggregators like Amazon are spreading into other sectors and also becoming content creators…

Think Amazon is just about aggregating books? Think again! In 2011, Amazon added access to 5,000 movies and TV shows for Amazon Prime members. On September 4, 2012, Amazon signed a deal with pay-TV channel Epix to feature thousands of their movies on its streaming service, in a move to rival their competition Netflix. The news pushed Netflix shares down as much as 11 percent. Amazon is into hardware too, having launched its new kindle “fire” tablet. Lining up easy access to content such as movies for tablet users is part of Amazon’s strategy.

Amazon Movie Content NegotiationAmazon has also announced plans to produce pilots for six original comedy series. These pilots will be created by different Emmy-winning writers, Academy nominees, TV stars and some newcomers from the company’s open-door development process.

Since launching our original series development effort, we have received more than 2,000 series ideas from creators around the world with all different backgrounds, and we are extremely excited to begin production on our very first set of pilots,” said Amazon Studios director, Roy Price.

Amazon Instant Video will post the six pilots for free and viewer response will help determine if the series will go into a full-season production.

Based on these examples, whatever direction convergence takes, it seems as though all roads seem to lead to a requirement for more effective deal-making…

“The Yes Book” will be published this Thursday 28th March on Random House. Order your copy here.