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OK?  GIVE ME FIVE?
OK? GIVE ME FIVE?
11/08/2010
Was the price of FIVE OK for Desmond?

On the face of it, the takeover of Channel Five by Richard Desmond for a price of £103.5 million is a great example of two well-matched parties ending up with an agreement that suits both of them.

However, dig a little deeper and it would appear that Five’s owners, RTL, have got the better of the deal, by exploiting their “coinage” more effectively than Desmond.

“Coinage” is the currency used to make deals. Any win/win deal requires that the underlying needs of the parties to be met.  These are not just the outward expressions of what the parties say they want (things like price, delivery and quantity) but the underlying needs that drive the parties.  “Coinage” consists of concessions which have a high value to the receiver (because they meet one of these personal needs) but a low value to the giver – to whom they are the equivalent of loose change..

Looking at RTL’s needs in the negotiation it is not difficult to detect a need for “security”. Five has been shipping cash for some time – caught in a bind between falling ad sales, lack of scale and lack of funding to create original programming or expensive acquisitions. Its value has been written down by almost £400 million in the last two years. It lost £9.1 million last year and it has only 8% of the TV ad market. This cannot have been comfortable for parent company, RTL, part of the Bertelsmann family. And it certainly does not fit with Bertlelsmann’s normal, cautious approach to business.

From Richard Desmond’s point of view the “need” being transmitted loud and clear is a “belonging” need. Here we have an ambitious and successful Publisher with a well-known background in adult publications who probably wishes to join the club of “serious” Media owners. Adding Channel 5 to the Sunday Express, the Daily Star and Ok! Magazine makes him arguably one of the most significant Media owners in the country, and gives him the chance to create an E! Style channel based around showbiz and celebrity shows.

So, whatever Price was initially demanded for the sale of Five, it should  not in theory have been difficult for Richard Desmond to reduce that in return for accommodating RTL’s underlying security need to staunch the out-flow of cash. His “coinage” would have been an ability to make that pain go away instantly, based on the fact that he is a cash-rich individual, reputedly worth some £950 million.  Equally, RTL had some powerful coinage as well – it could accommodate Richard Desmond’s underlying desire to “join the club” of serious Media players. Its coinage would have been have been that it held the entry ticket for that club – albeit a rather scruffy one which brings admission only to a poor seat at the major broadcasting table.

So, who deployed their coinage to greater effect? Well, it surely must be significant that RTL put Five up for sale at £100million, and that is pretty much exactly the price Desmond paid for it. Moreover his bid was apparently twice that of his nearest competitor.  A good sign of coinage being well deployed is that one party ends up obtaining more of what it wants, because it uses its coinage to meet a high value need on the other side, and obtain what it needs in return. RTL would seem to have used the lure of media ownership to maintain a far higher value for Five than the market would otherwise have been prepared to accept.

Desmond may be very happy with his purchase, but it’s probably RTL who are laughing..

CAN BA SOLVE STRIKE?
CAN BA SOLVE STRIKE?
14/07/2010
Heavy Turbulence grounds British Airways Negotiations ...

Another week of turmoil at British Airways, involving record losses of over £500 million, more industrial unrest with Unite, and culminating in a near-riot by bitter airline staff at ACAS on Saturday night.

This disputehas now been running for over 15 months. This is highly unusual in post-Thatcher Britain, with all its obstacles against Union-organised strikes. What is going on here? The parties seem to have got themselves into a spiral of ‘lose/lose’, where it’s more important to damage the other side’s interests than to secure their own. If that’s the case, then how on earth are they going to break that cycle and strike a deal?

The headlines this morningwere all about the ACAS Headquarters being invaded by ‘left-wing’ protesters, jostling and abusing Willie Walsh. They had apparently gathered as a result of Derek Simpson tweeting about the progress of the talks from the negotiating room.

From a PR point of view, the incident is a gift to Willie Walsh. It enables him to continue to paint Unite and its fellow Stewards and Stewardesses Union, BAASA, as extreme, divided and unreasonable. He could also be seen on the Andrew Marr show on Sunday morning, piously declaring how shocked he was to find Unite’s Simpson tweeting the confidential nature of the discussions in real-time. Some commentators have even been moved to sympathy for Walsh as a result of him being cornered by militants in this way.

However, it may be more revealing to consider why this behaviour is happening, rather than just condemning it out of hand.

This kind of gratuitously aggressive behaviour looks like it results from a ‘lose/lose’ attitude. This is the kind of attitude that develops when one party to a negotiation feels that the other side is determined not to give them a ‘win’. Sometimes a revenge psychology develops in which the aggrieved party says to itself ‘Well if you’re not going to give me a win then I’m going to make bloody sure you lose as well’. This frequently tips the other side into a lose/lose attitude too, and a counter-productive ‘tit for tat’ process develops in which each side forgets what it originally wanted and just focuses on causing damage to the other party.

If Unite and BASSA have a lose/lose attitude now, it can only be because BA and Willy Walsh spent too long playing ‘win/lose’ and giving the Unions no prospect of a win.

This would accord with reports of Willy Walsh himself having a very abrasive attitude to the negotiation. He has been variously described by Unite representatives over the past weeks as ‘macho’, ‘petty’ and ‘vindictive’. Walsh himself now seems to reciprocate this attitude, describing Unite as ‘dysfunctional’ and out to ‘destroy’ BA.

This has seen him apparently lose focus on his original negotiating aim (to deliver £62 million of savings) and instead get embroiled in a fist fight at far greater expense to the airline (the strikes so far have cost BA £40 million and it’s estimated the further planned strikes will cost BA up to another £140 million).

If both parties now have a lose/lose attitude then the parties are going to find it hard to reach agreement. What needs to happen is that both sides change their approach to a ‘win/win’ attitude, in which each side is permitted to obtain an acceptable amount of what they want.

Given that both parties are going to need to work together going forward it should not be difficult to see why this attitude is sensible all round. However, when the parties are mired in ‘lose/lose’ attitudes this is easier said than done.

A shift in the climate of the negotiation from ‘hostile’ to ‘cool and objective’ or even ‘open’ needs to take place. Going to ACAS is a step in this direction, but I would suggest the parties need to go further.

New talks should take place at a completely different venue that shifts the moods of the parties and focuses them positively. How about on an aeroplane flight, where each side can be reminded of the real purpose of the business they are arguing about? And each party should bring along different representatives to engage in the discussion, who have not been brutalised by the negotiations so far. Messrs Walsh, Woodley and Simpson should arguably not be there at all. These representatives might not bring the same baggage to the conversations, and so would have a better chance of re-setting the climate.

If that can be done, then the parties have a chance of re-exploring their issues positively and coming up with a deal which saves face and addresses each side’s needs.

Failing that, either one side is going to end up imposing a win/lose solution on the other, (which will not last, as nobody likes to end up as a loser) or the talks may continue to stay grounded for some time yet.

BSKYB REJECT MURDOCH'S BID
BSKYB REJECT MURDOCH'S BID
14/07/2010
Can BSkyB resist Rupert's Bear-hug?

The proposed deal for News Corp to buy out the other existing shareholdersat BSkyB throws up some interesting scenarios in relation to the participants’ needs and how they can best be met. A quick look at the needs, bargaining power and behaviour patterns on all sides suggests that a deal will be forthcoming. But how this might be viewed in any investigation by the Competition Authorities is another matter.

Looking at the needs of Rupert Murdoch’s Newscorp it would seem that a familiar pattern is being played-out. The deal would provide a source of cash from BSkyB’s operations which are forecast to grow rapidly – by as much as 70% over the next 2 years. This would no doubt be useful to Murdoch’s media empire at a time when there is a reassurance need for cash-flow, as newspaper revenues plummet all over the world, and the jury remains out on whether this trend can be reversed through the introduction of the kind of “pay-walls” recently introduced by Murdoch for The Times newspaper.

In terms of other personal needs, there is no need to dwell long on the partial satisfaction of Murdoch’s ‘achievement’ need which this deal would also represent. The man has been executing headline-grabbing and ground-breaking media deals for 60 years, and is not likely to stop scratching that itch until he is 6 feet under, at the earliest.  The deal is also another gratifying instalment in the saga of the Murdoch Dynasty, a family that loves to be seen to be commanding respect and attention.

That brings us to James Murdoch, who as CEO of BSkyB finds himself in an interesting position. It is hard to believe that Murdoch’s bid would have been launched without his son’s tacit support. However, though he is no doubt loyal to his family, I wonder if there is something just slightly irritating in this deal for baby James?

Like any child of a masterful parent, he may sometimes feel that his father’s shadow looms large in his life. Children in his situation often develop strong and understandable needs to create their own achievements. Over the last few years he has successfully escaped Murdoch Senior’s shadow by forging his own formidable reputation as a very successful and smart businessman. Now he finds himself on the brink of coming back under his father’s wing again.

It may well be that as part of the deal to garner his son’s support for this take-over, Rupert Murdoch has had to come up with some ‘coinage’ – a negotiating reference to a concession which may not have huge value to the giver, but is highly valued by the receiver because it meets a personal need. Perhaps this coinage is a potential new role for his son, maybe in another company or division, where James can continue to develop his reputation and success, and satisfy his own dreams and ambitions independently of his father. Or maybe, dare one say it, it’s even a promise that Rupert Murdoch will step aside from running the combined entity in due course in favour of his son?

And what of the other independent Board members of BSkyB, including heavyweights like Gail Rebuck (Chairman and CEO of Random House), Alan Leighton (ex CEO of Asda) and Nick Ferguson? They may well be feeling that this is a difficult deal to stop, regardless of their point of view. Newscorp has a lot of bargaining power to bring to the table:

  • Market power, weight deriving from its size and resources
  • Expert power in relation to its understanding of the satellite-TV market
  • Network power based on the connection between Murdoch Senior and his son.

In this context, other Board members may be feeling uncertainty as to their own position, if and when the takeover happens. Rupert Murdoch is known as a tough negotiator whose style is based on ‘pushing’ his own agenda, rather than accommodating the needs of others. So, the other BSkyB Board members may feel that their needs are best satisfied by preserving their own reputation for integrity and shrewdness, through pushing Murdoch to the highest price to which he will go.

This certainly seems to be the gist of the early exchanges of bids, with BSkyB rejecting Murdoch’s current bid of 700 pence per share and insisting that a price in excess of 800 pence per share is required. This would value the 61% of BSkyB shares that Murdoch wishes to buy at some £1 billion more than the News Corp offer of £8 billion (which itself represented a 27.5% premium above the average BSkyB share price over the last 12 months).

Rupert Murdoch is not a man easily put-off when he closes in on a potential acquisition, so the expectation must be that, ultimately, enough needs would be met by all participants that BSkyB agrees to the take-over deal. Whether the Competition Authorities will feel the same way is another question.

There may be issues in Brussels and in front of the OFT about an arrangement which would give one company control over the largest digital pay-TV platform in Britain, major newspapers such as the Times, Sunday Times, and the Sun, and a burgeoning broadband and telephony operation. However, that’s another deal for another blog…

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01/11/2010
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