Viacom’s attempt to Position vs. Music Industry

On 02/16/2010, In Case Studies, Hard Bargaining, Negotiation Basics, Negotiation Strategy, By Andrew Boughton

February 12th Philippe Dauman, Viacmon’s president and CEO, issued the following statment:

As we go forward, we are continuing to focus more on software than hardware, looking to reduce the cost structure associated with Rock Band, being selective in the music titles that we choose for Rock Band based on their cost. The music industry will assist with this category to make sure that it can continue on a profitable basis in the future and then finally we think we have the best games in the category, we’ll continue to rollout exciting products.

An obvious signal to the Music Industry as he begins the negotiation by creating his position through the media.  It is even more effective when followed by a letter/email/phone call to each company with his offer.  Effective positioning helps to shift the frame of reference before the negotiation technically begins.  Philippe is preparing the industry to receive his demands. To truly shift their expectations you need to deliver an offer, effectively dropping an anchor.

The Music Industry would be wise to attempt to shift the focus back onto their position with a preemptive strike.  Instead of allowing Viacom to open the discussions with some ridiculous offer like 50%, they need to provide an anchor of their own to begin the discussions around their position.  By opening first the initial expectation is set.  This is definitely shaping up into a classic Hard Bargaining negotiation.  I’ll keep my eye on any developments.  What do you think?

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Case Study: The Music Business

On 01/29/2010, In Advanced Concepts, Case Studies, Negotiation Strategy, By Andrew Boughton

Today I thought it would be interesting to take and dissect a real negotiation to see some of the concepts in action.  So here is the setup, I’ve obscured some of the facts to protect the guilty:

Parties Involved:

1.  Record Company – Very large entertainment company (more…)

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Price is Always Distributive!

On 01/12/2010, In Auctions / Bartering, Concession Trading, Hard Bargaining, Negotiation Basics, By Andrew Boughton

You can’t have a collaboration over price.  Price is always win-lose.  What you gain the other party loses (or pays) and vice versa.  There is no way to grow the proverbial pie when it comes to price.  Unfortunately as luck would have it, price also seems to always be a very important element in negotiation.  If you constantly equate all other trading variables back to price you will, whether you like it or not, create a distributive environment.  The key is to shift your focus to profit!  Instead of thinking in terms of cost or price think in terms of value.  The ability to incorporate intangibles into a deal is what separates a skilled negotiator from the average bazaar merchant (although hard bargaining also takes a certain type of skill).  The ability to link variables other than price to create incremental value is where all the value is in negotiation.

Having said that (stealing a line from “Curb Your Enthusiasm”), there is a time and place when a good old fashioned price negotiation is just what the situation calls for, so don’t be afraid to shift gears in either direction.  After all, negotiation is all about the circumstance and your ability to determine what is appropriate.

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Characteristics and Behaviors of Hard Bargaining

On 01/07/2010, In Hard Bargaining, Negotiation Basics, By Andrew Boughton

Hard Bargaining is probably the most recognizable type of negotiation.  Buying a house, buying a trinket in a foreign market, selling an asset, buying close out inventory, disposing of equipment, etc.  When most people picture Hard Bargaining they think of some over the top personality slamming his fist on the table making ultimatums and demands.  Because motives are clear (it’s all about the price) trust is not a factor.  A lack of trust combined with high levels of conflict breeds an environment filled with all sorts of negotiating tactics.  (Click the link for a list of common negotiating tactics)

Contrary to popular belief I have found that it is the strong silent type that tend to be more effective during these types of negotiation.  Antics simply run the risk of antagonizing the other party causing them to make emotional rather than rational decisions (i.e. they won’t do business with you because you have pissed them off).

EXTERNAL CHARACTERISTICS: When there are several alternatives.  Deals become more complex, however, price is still the main consideration.  This type of transaction is generally a one–off, however, subsequent transactions can be associated with the deal terms.  Subsequent deals with the other party will be influenced by the outcomes achieved as precedents start to form.  The focus of a hard bargaining negotiation is primarily short-term (one year horizon).  Typical negotiations include asset and equipment purchases, leases, acquisitions, divestitures, etc.

BEHAVIORAL ELEMENTS: Hard bargaining requires very little trust, often financial concerns are dominant (“is it doable”).  Satisfaction is received through opening positions, subsequent moves, and compromise on minor issues.  Again, you can afford to use as much power as possible without causing an emotional response from the other party.  You can afford to demonstrate your power through arrogance, intransigence, and obstinance.  The primary differences between an Auction and Hard Bargaining are more variables, subsequent transactions, long term precedents, and less extreme divergence of power.  Often neither party is entirely dependent and both parties may refuse the deal.

(more…)

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