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Big Mouth Negotiations: Howard Stern Vs. Sirius Radio

Friday, February 12th, 2010
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What A Fantastic Way To Do Pre-Negotiation Positioning!

What A Fantastic Way To Do Pre-Negotiation Positioning!

The Background

That Howard Stern is famous, nobody can deny. That he is paid a lot of money is another indisputable fact. Where things get interesting (from a negotiating point of view) is what happens when his current contract runs out…

If you’ve ever listened to Howard for any length of time, he’s always talking about his relationship with the Sirius satellite radio network. He’s very grateful for everything that they’ve done for him and his team; however, he’s recently been saying on the air: “I don’t think that I’m going to be re-signing.”

Clearly pre-negotiating posturing is already well underway. Howard is no dummy and he’s got a great way to communicate his negotiating position to the other side of the table via his daily radio show.

Back when Sirius hired Howard away from traditional radio, satellite radio was a new kid on the block and more of a curiosity than a viable radio network However, by hiring Howard, Sirius was able to put themselves instantly into the press and brought themselves to the attention of both new subscribers as well as investors. Since he’s been on board, Sirius has been able to add millions of new subscribers.

Howard was richly rewarded for making the jump to satellite radio – the contract that he got gave him $500M in cash and stock over five years.

The Posturing

The CEO of Sirius radio, Mel Karmazin, has been quoted as saying “It is my strong desire that we keep Howard in satellite radio on terms that are in the best interest of our shareholders.” Clearly Mel is also skilled at the pre-negotiating posturing game also.

The world has changed since Sirius hired Howard five years ago – they don’t need Howard as much today as they did back then. Sirius has been able to add other well-known talent to their lineup included most recently Rosie O’Donnell.

Now that’s all good and well, but having Howard on board is a big plus for Sirius. If he were to leave, then Sirius would probably lose subscribers. What’s interesting is that the company has changed its focus from only growth to now being more focused on profitability.

The reason that anyone can even start to talk about Howard leaving is because it’s a real possibility. The cause is pretty simple — Howard’s paycheck represents a very large expense for the company.

The Possible Outcomes

So as students of sales negotiating, what does all of this show us? Well, we’ve got two parties doing their best to clearly communicate their starting positions to the other side of the table before negotiations even begin. There are a number of different ways that this could all end up.

Although unlikely, it is possible that Howard could once again land a job on traditional airwaves. He had originally left because of the public outrage over the content of his show; however, times have changed and this might not be such a big deal any more. The challenge of “saving” traditional radio might be more than Howard can resist.

What All Of This Means For You

There is much for us to watch and learn from here: Howard wants to work less and make more money, Sirius wants him to work more for less money.

When negotiating starts, it’s almost certain that we’ll see some very interesting posturing occurring by both sides. Due to the public nature of Howard’s job, we’ll be provided with a window into the negotiations and a running commentary on how he wants us to think that he feels about the process.

Turn your Sirius radios on and get ready for some lessons in high-stakes negotiations!

Do you think that Howard Stern will stay on the air at Sirius satellite radio after his contact runs out?

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What We’ll Be Talking About Next Time

As a new year gets underway, it might be a good time to have a talk about one of your most important types of negotiations: asking for a raise. Wait a minute: did I see you just grimace? Did you turn away? Why the reaction – it’s your paycheck after all, shouldn’t you be taking charge of how much you make?

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He Who Works The Hardest, Wins The Negotiation

Tuesday, September 29th, 2009
Hard Work Pays Off In Negotiations

Hard Work Pays Off In Negotiations

What is the secret for walking away from your next sales negotiation feeling satisfied? We all wish that there was some magic “silver bullet” technique that if we knew what it was we could use it every time we negotiate in order to be able to walk away feeling like our negotiating time was well spent. It turns out that there is such a technique, and it’s called doing your homework.

The Hard Work Theory

I don’t think that I’m going to be causing anyone to fall over in surprise when I tell you that it has been proven time after time that the harder that you work during a negotiation, the better the result that you’ll be able to achieve. This is what professional negotiators refer to as “the hard work theory“.

An interesting side benefit to the hard work theory is that during the negotiation, the harder that you make the other side of the table work, the greater will be their level of satisfaction with the final outcome. This of course means that they will be that much more likely to fully honor their side of the agreement.

It goes without saying that there is another side to the hard work theory. Simply put, lazy people make poor sales negotiators. What this means for you is that the next time that you are preparing for a negotiation and are assembling a team, you’re going to want to make sure that you have no lazy people on your team!

Using Work Power To Build Negotiating Power

Since the negotiator who works the hardest will generally come out of any negotiation ahead of the other side, this brings up the question of how we can use this “work power” to our best advantage. It turns out that there are three principles that can guide us in doing this:

  • The Least Effort Principle , This principle states that most people would prefer to make their lives as easy as possible. This means that they really don’t want to negotiate , they’d rather just say “yes” to an offered deal instead of complicating their lives by having to negotiate for a better deal. What this means for you is that most people won’t want to walk away from a sales negotiation once its started because it would be too much effort to find someone else and restart negotiations.
  • The Wasted Work Principle , This principle is exactly what it sounds like, nobody likes to waste their time and energy. What this means for you is that once a sales negotiation has been started, the other side wants to see it through to the end. In fact, the longer the negotiation goes on, the more the other side wants the deal to close.
  • The Easy-Come-Easy-Go Principle , Simple put, nobody really wants anything for free. The other side will not appreciate anything that they get too easily. Instead, you need to make it at least somewhat difficult for the other side to get what they want. Only by doing this will you boost the other side of the table’s satisfaction with the final result of the negotiations.

Final Thoughts

The buyer who makes up his or her mind that “there’s always another deal” if this deal collapses is best able to show some resolve and obtain a better price. However, thankfully, most negotiators are too lazy and subscribe to the three work principles of negotiating: least effort, wasted work, and easy-come-easy-go.

What this means for you is that the more energy and effort that you put into a negotiation, then the better your odds of coming out of it with a deal that both sides are happy with.

If you can learn to do your homework better than the other side of the table before your next negotiation, then you will be able to close better deals and close them quicker.

Click here to get automatic updates when The Accidental Negotiator Blog is updated.

What We’ll Be Talking About Next Time

In this world there are two types of negotiators: the good ones and everyone else. The goal of any negotiator is to become a member of the group of good negotiators. The challenge is that the path to becoming a good negotiator is not always clear. However, there are two basic skills that lay on this path: persistence and the ability to take the right risks.

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Negotiation Firestarter: The Take It Or Leave It Tactic

Thursday, January 8th, 2009
Take It Or Leave It Is A Negotiating Tactic That Can Cause Hostility

Take It Or Leave It Is A Negotiating Tactic That Can Cause Hostility

If you really want to set off the other side of the table during a negotiation, one great way to do this is to tell them that they can “take it or leave it.” This is pretty much the verbal equivalent of throwing gas on a fire – you are guaranteed to generate hostility on the other side of the table when you use this phrase.

We react in exactly the same way if the other side tries this tactic on us during a negotiation. This is understandable; however, if we take just a moment to think about it, we should probably be used to dealing with this negotiating tactic.

The deals that are presented to you in the course of an average day are almost all of the “take it or leave” it nature. You see these types of deals in the insurance bills that you get, the groceries that you buy, and the parking ticket that you pay. Although they might not say it explicitly, these are all subtle forms of the “take it or leave it” tactic.

Before you decide to burst into flames the next time that someone uses this tactic on you, take a moment and give some thought to why the other side might be using this tactic. They have decided to only offer a fixed price and here are some of the reasons that they might be doing this:

  • They don’t want every one of their employees to have to have good negotiating skills or to take the time that a negotiation requires in order to successfully complete a deal.
  • They might be willing to negotiate with you on this deal; however, they don’t want to have to negotiate with you in the future.
  • If they negotiated with you and ended up lowering their price, then they would have to lower their price for all of their customers.
  • They know that you cannot afford to “leave it”.
  • They have already dealt with many other customers who had no problem paying their fixed price.
  • They can’t afford to lower their price any more because they are already selling at their rock bottom price.

When you look at it this way, you’ll realize that most business is normally done using the “take it or leave it” tactic no matter what we choose to call it. We need to realize that many prices are set because of existing laws or regulations.

If you find yourself in the position of having to use the “take it or leave it” tactic during a negotiation, then you need to search for ways to reduce the natural hostility that this is going to cause in the other side.

Here are the best methods for reducing hostility when you decide to offer only a “fixed price” to the other side:

  1. Show the laws / regulations that are causing you to have to offer the product at the stated price.
  2. Show the company policy that requires the product to be offered at the given price.
  3. Publish a price list.
  4. Publish a standard list of discounts.
  5. Display the price of your product / service where everyone can see it.
  6. Provide proof that shows all potential customers that the price that you are using is the same price that is being offered to everyone.
  7. Simply make sure that you provide a good justification for the price that you are using.

As always in any negotiation situation, the more discussions that can be held face-to-face the better the negotiations will go. Listen to what the other side has to say and make sure that everyone has a chance to save face and come out ahead.

Have you ever been confronted with a “take it or leave it” deal during a negotiation? How did you react to this? Have you ever had to present a “take it or leave it” proposal to the other side? How did they handle it? Leave me a comment and let me know what you are thinking.

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So Just How Do You Negotiate With Pirates?

Thursday, December 18th, 2008
Pirates Aren't Just In Movies - So You Had Better Be Ready To Negotiate With Them!

Pirates Aren't Just In Movies - So You Had Better Be Ready To Negotiate With Them!

Negotiating is both an art and a science. We study what works and what doesn’t in order to make sure that the next time that we are in a business situation in which somebody has something that we want, we are able to negotiate to get it. But what about pirates?

The newspapers are all abuzz about the pirates who are operating out of Somalia. So far this year, there have been 96 pirate attacks this year. 40 of these attacks have resulted in pirates boarding a ship, taking over control, and then demanding a ransom for the ship and its crew. World wide there have been 83 reported pirate attacks in the 3rd quarter alone.

When pirates capture a ship, they then demand a ransom in order to release it. These ransom demands are generally in the range of $1 – $2 million dollars. However, in the case of a Saudi oil tanker the ransom may have been as high as $15 million dollars.

What is a ship owner to do if his ship is captured by pirates? Apparently a lot of them are calling Holman Fenwick Willan, a London maritime firm. HFW has 6 lawyers who are currently working on pirate cases. Ashby Jones wrote an article in the Wall Street Journal in which HFW stated that they are working on “over a dozen” of the 20 pirate hijackings that have occurred in the Somalia area.

So just how does one negotiate with pirates? At HFW, their first job after being notified of a pirate highjacking is to calm their customer’s fears – nobody seems to know how to react to this sort of thing.

The next step is straight out of the negotiators handbook – do some research. HFW then works to find out just where the hijacked ship was registered, oh, and where exactly the hijacking occurred. This will set boundaries around the negotiations and will determine what laws are in play and will determine who is liable.

The issue of paying a ransom is, of course, a big deal. One key question that the negotiator needs to resolve right off the bat is if it is even legal to pay a ransom. It turns out that under U.K. law, paying a ransom IS legal and that’s important because for some reason most marine insurers are located in England.

The actual negotiations with the pirates are, to put it mildly, stressful. The negotiations are conducted by negotiators that HFW obtains for their clients. Forget suits and ties, this special breed of negotiators generally come from the miltary special forces. Probably the right men (I think that I can be sexist here) for the job.

Once a deal has been struck and the ship has been returned to the crew, the negotiations are not over. Indeed, they are often just beginning. The boat owners will now start to negotiate with the firms who were shipping cargo on the boat in order to get them to reimburse them for part of the ransom that was paid. These negotiations can drag on for a very long time.

We are all privledged to live in the 21st Century; however, sometimes aspects of the 1800′s, such as pirates, intrude into our world. Thankfully the negotiation skills that have been developed over the centuries serve us just as well now as they did then.

If you were called on to negotiate with pirates, what research would you do? Do you think that they would have the power in the negotiation or would you? Would creating a solution with mutual satisfaction be important to you in this type of deal? Leave me a comment and let me know what you are thinking.

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Do You Want To Play A Game? EA & Take-Two’s Negotiating Failure

Tuesday, September 23rd, 2008
EA Tried To Negotiate To Buy Take-Two Software

EA Tried To Negotiate To Buy Take-Two Software

At this blog, we firmly believe that the best negotiating learning comes from observing the real world – not from just reading yet-another-book-on-negotiating. Thankfully, there continue to be a number of fantastic stories in the news that provide key lessons on how companies negotiate with each other and, all too often, what goes wrong…

Set the scene. The players in this particular ongoing drama were Electronic Arts (EA) and Take-Two Interactive Software. EA is a well known developer of video games for a number of different platforms. EA has a number of very popular titles including the best selling “Madden Football“. Take-Two is a young upstart firm that sells the insanely popular “Grand Theft Auto” games. Our story really starts seven months ago when EA made an unsolicited bid of $2B for Take-Two.

So what happened? Take-Two basically said “Thanks, but no thanks.” They stated that they thought that the EA offer of $25.74/share was too low. One reason that they said this was because their most recent game, Grand Theft Auto iV, had already sold over 10M copies.

What happened next? EA ended up letting its hostile takeover bid expire. However, as recently as this August it still seemed as though a deal might be had. EA announced that they were entering into confidential discussions with Take-Two during which EA would have access to non-public info about Take-Two’s business plans.

Where do things stand now? EA has announced that they will not make another offer for Take-Two.

What happened here? Underneath all of the discussions of how to merge two large software firms was a ticking time-bomb: the 2008 Christmas season. From the beginning, EA had made it clear that in order for the deal to make sense for them, they would have had to have been able to integrate the Take-Two product catalog into the EA catalog in time for the Christmas season. What this meant is that a deal would have had to been inked by mid-September in order to allow enough time for this to happen.

What can we learn from this failed deal? If there is a schedule issue, then you need to stay aware of it during the entire negotiation. The other side of this coin is that if you don’t want a deal to happen (like Take-Two) then simply by dragging your feet you can cause the deal to go away.

How important have dates been in your negotiations? Have you ever had a chance to use a looming date to help move one of your negotiations along? Has a negotiation ever been derailed by an inability to wrap things up by a given date? Leave a comment and let me know what you think.

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