What issues are most important to you (in parenthesis list your position on each issue)?
Buy Moms.com
My task is to negotiate the best price and terms for Moms.com. I want to secure the show because it boasts strong ratings, appeals to almost half our current viewing audience, is an ideal fit for our demographics in the 6PM time slot, and ultimately has the potential to bring in impressive ad revenue.
Licensing fee (cannot exceed $60,000 per episode, or $6,000,000 for the show)
The case does not specify concretely what my most important interests are, but I know management won’t let me spend more than $60,000 per episode on licensing fees. If I cannot negotiate for less than 6k, the show will not air and I will have to purchase a different program for the time slot. Might make me look inexperienced to upper management.
Payment savings (0% upfront and payments spread evenly over 5 years)
My interests revolve around the opportunity to save 10% each year that payment is delayed. Although the case does not suggest payment savings is a deal-breaker, it will make me look incredibly good in front of my bosses and allow for more money for the station to buy more shows.
Program runs (optimal program runs for maximized ad revenue is 8)
The value of Moms.com is the show’s potential advertising revenue. Our team has calculated that 8 runs per episode would add an additional $1,600,000 in revenue, when compared to the standard 6 run calculations.
Buy Juniors (must be less than $20,000 per episode to profit)
Although my job is to negotiate the best price and terms for Moms.com, buying another show from HOLLYVILLE can increase my negotiating power and expand demographic appeals. Due to WHCI’s weak program profile, I might be interested in purchasing the show to appeal to the teenage market segment.
What is your BATNA? Reservation Price? Target?
My BATNA to purchasing Moms.com is to buy a different program from a different producer- valued at 3M. As noted, management will not pay more than $60,000 per episode to license, so $60,000 is my reservation price (the most I’m willing to pay per episode). For Juniors, my reservation price is <$20,000.
My target revolves around the successful negotiation of the following terms:
Purchase Moms.com for $30,000 per episode (lowest possible amount)
Agree upon 8 runs per episode to maximize advertising revenue
Payment plan with 0% upfront and payments spread evenly over 5 years to maximize savings through deferment
Buy Juniors for a licensing fee below $20,000 to result in a positive profit for the station
What are your sources of power?
As a buyer, I have a few sources of power to leverage in the negotiation. First, WCHI will not be competing with network stations, WILL, or WXYZ in purchasing Moms.com. WWIN already has a strong 6:00 pm show, but may be interested in buying Moms.com to keep competition at bay. Therefore, I will likely only be competing with one network to buy the show. Second, HOLLYVILLE has had a poor network season and its financial position is deteriorating. Third, HOLLYVILLE is very interested in selling a new show, Juniors. If WCHI offers to buy both Moms.com and Juniors, the station can negotiate a bundle deal with betters rates for both shows. Finally, because WHCI is a subsidiary of MULTIMED, a highly successful national multimedia corporation, HOLLYVILLE may be more likely to negotiate to maintain a positive relationship with the company..
What issues are most important to your opponent (in parenthesis list their expected position on each issue)?
5.Sell Moms.com
HOLLYVILLE is very interested in selling Moms.com. The show has done very well and consistently ranks in the top ten with a 20 rating and 30 share in a competitive prime time slot. While the show is performing well, HOLLYVILLE is struggling financially. They failed to sell two shows they’d planned for syndication and there financial position has deteriorated significantly. They will be determined to sell to our company because WWIN is the only other serious competition.
Licensing Fee
The case does not give much information about the price HOLLYVILLE is attempting to receive. However, we do know that they will not sell for less than $30,000 per episode. They are struggling financially and so they will be determined to sell for a high price.
Receive Up-front Payment
The case informs us that HOLLYVILLE hope to obtain 50% up-front payment and 25% in years 1 and 2. They are struggling financially, and therefore value early payments highly.
4. Program Runs
The case does not explicitly say that whether HOLLYVILLE would prefer a higher or lesser number of episode runs. However, I would assume that they would want to limit the number of episode runs so that it does not become saturated in the market and they could sell the series again in the future. However, this is likely to be less of a priority in comparison with receiving up-front payments and a good licensing fee.
Maintain Good Relationship – Sell Juniors
HOLLYVILLE are very interested in selling programming in future years. In particular, they are interested in selling Juniors. The demographics for this show are not as appealing as Moms.com and our company values the show at $20,000 per episode.
What is your opponent’s BATNA? Reservation Price?
My Opponents BATNA is to sell Moms.com to another company, specifically WWIN.
My Opponents reservation price is $30,000 per episode.
What are your opponent’s sources of power?
The Success of Moms.com.
As I mentioned above, Moms.com is a popular show that appeals to a highly profitable demographic.
Another Station Interested
WWIN are an independant leader in the market and currently have a highly rated 6:00pm show. To ensure Moms.com does not erode their market share they are likely interested in purchasing the show. They are in a strong financial situation and will likely offer a good price.
What is your opening move/first strategy? Other important information? You should also create contingencies and plans of action given potential moves by your opponent.
Because we are the buyers, I imagine they would start off with their “sticker price” for the show first. However, it would be ideal if they started with asking us how much we wanted to buy Moms.com for; we could anchor to our lowest possible price per episode ($30,000) and 0% of money paid upfront. Since they are most likely going to set their high anchors, we can start by breaking it down piece by piece instead of making an aggressive counteroffer. For example our net advertising revenue from the show is 8.4M based on 6 runs of the show. If they want to run the show for 5 or less, we can explain that is not aligned with what is typical for a show and how we want to reach as many viewers as possible.
We will have a Google Sheet ready to calculate net value for the show, licensing for moms.com (fee/episode x 100 episodes), payment savings, net licensing fee of moms.com, and our net programming revenue. If our profit from revenue is below 3M, we will not be signing a deal, since our expected revenue altogether is $8.4M.
HOLLYVILLE and MULTIMED are both big multimedia corporations and it is in our best interest to keep a good relationship with them. We do not want to be rude or offend them with our negotiation. We want to keep a mutual level of respect since it is possible we will continue to do business with them. If things start to go a little sour, we can remind each other of why our partnering is a mutual benefit. Thus asking for Juniors if things don’t seem to be going well will show them we have a genuine interest in building a good partnership with them (in the past, two shows they planned for syndication never sold, we want to show them there’s opportunity here).
Before we sign the deal, we could do a post-negotiation if it seems like that would be a good idea. This could be determined if we figure out a position that is very important to them that wouldn’t affect us as much or if neither party is happy about something we previously agreed on. A final check of every agreement before we sign is essential.
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