Three Examples Of Negotiating Failures

Negotiators can learn a lot from negotiations that fail
Negotiators can learn a lot from negotiations that fail
Image Credit: David Kovalenko on Unsplash

As negotiators, every time that we go into a negotiation, we are optimistic that we are going to use our negotiation styles and negotiating techniques to be successful. We believe that we’re going to be able to work with the other side of the table and come up with a deal that both sides can live with. This kind of optimism is important to providing us with the drive to keep moving forward even when things can get tough. However, we all understand that sometimes negotiations don’t work out. There have been some pretty spectacular failures. From a negotiator point of view, these failures can teach us a great deal about how to make sure that our next negotiation is a success.

Publisher Simon & Schuster versus Bookstore Barnes & Noble

The number of places where people can go to buy books has been decreasing over the past few years. In fact, there is only one remaining “big” book retailer: Barnes & Noble. Since they are the last major retail bookstore chain in the United States, Barnes & Noble has been using their market position to press publishers to make steep concessions to enable their survival against and other online retailers. The bookstore chain negotiated significantly reduced wholesale prices for books from Simon & Schuster’s and also tried to charge the Simon & Schuster more to display its titles in its stores. Simon & Schuster was not happy about this and they pushed back.

In January 2013, after months of impasse, Barnes & Noble significantly reduced its orders of Simon & Schuster titles and engaged in other hardball tactics, such as refusing to book the publisher’s authors for in-store readings. Barnes & Noble sells about 20% of consumer books in the United States, Simon & Schuster editors and their associated agents and writers were very upset about the bookseller’s decision to use them as a bargaining chip.

In August, the two companies issued a joint statement saying they had come up with a solution to their disagreement. The details remain unknown, but any gains they achieved would be reduced by the profits each side lost during the months of impasse. Negotiators need to understand that hardball tactics often end up undercutting both parties to a negotiation.

Apple’s Book Price-Fixing Defeat

Way back in 2007, five major U.S. publishers were unhappy with Amazon’s low, flat price of $9.99 for e-books. These publishers decided to do something about this problem. They negotiated a new business model for e-book pricing with Apple, which was open to such a negotiation because they were getting ready to launch the iPad.

The model that was in place for how books were being sold required publishers to sell their books and e-books to retailers like Amazon, which then set their own prices. What this meant is that the publishers could not control the price of their books. Apple and the five publishers negotiated to switch to a so-called agency model. This new model would allow the publishers to set their own prices for e-books in exchange for giving Apple a 30% sales commission. Once this new model was in place with Apple, at least one of the publishers threatened to delay the release of its digital editions to Amazon unless it switched to an agency model, Amazon reluctantly agreed, and e-book prices rose across the industry to about $14.99.

This is when things took a turn for the worse. On July 10, 2013, a U.S district judge ruled that Apple and the publishers had engaged in a price-fixing conspiracy that resulted in consumers paying more for e-books. What negotiators need to take away from this story is that in their zeal to reach a mutually beneficial agreement, negotiators often forget the importance of considering how parties away from the table will be affected by the final outcome of their deal.

Time Warner Cable Company versus CBS Television Broadcaster

As you probably know, more and more people who subscribe to cable television are starting to “cut the cord” and drop their subscription. These former subscribers prefer to watch Netflix and Hulu. On October 31, 2013, Time Warner Cable reported a huge quarterly loss of television subscribers, the largest in its history: 306,000 of its 11.7 million subscribers had become cord cutters. The reason for the bad news has been attributed largely to an impasse with television network CBS over fees, which led to Time Warner blacking CBS out of millions of homes in New York, Los Angeles, and Dallas for a month during the summer of 2013. This had been the motivation for many Time Warner customers to unsubscribe.

The parties’ ultimate agreement was viewed as a victory for CBS, which won a promise of significantly higher fees for its programming from Time Warner in the blacked-out cities as well as the digital rights to sell its content to Web-based distributors such as Netflix. Time Warner ultimately gave in and halted the blackout, fearing a mass exodus of subscribers if the dispute interrupted the start of Monday night football on CBS.

Time Warner’s focus on the financial pain it was inflicting on CBS blinded it to the likelihood that it would suffer from the blackout at least as much. As was the case in Barnes & Noble versus Simon & Schuster, Negotiators need to realize that such penalties tend to escalate disputes and drive parties even farther apart.

What All Of This Means For You

I’d like to be able to tell you that every principled negotiation ends in a success. However, as we all know, this is not the case. Every negotiation that we participate in has the potential of ending in a failure. As negotiators we need to work for a successful outcome. However, some very large negotiations have ended in failure. We can learn from what went wrong in these negotiations.

One of the most public failures in negotiations occurred when Simon & Schuster got into a dispute with Barnes & Noble. Barnes and Noble was one of the last remaining big book seller chains and they decided that they wanted more price concessions from Simon & Schuster. Barnes & Noble started to play hardball and eventually the two parties had to work together to create a solution that they could both live with. However, the hardball tactics of Barnes & Nobel resulted in financial damage to both companies. Apple got charged with engaging in price fixing when five publishers convinced it to permit them to set their own book prices. Apple and the publishers had forgotten that their decisions would have broad ramifications. Time Warner and CBS got into a fierce contest that resulted in CBS being dropped from Time Warner’s lineup of channels for a month. Once again, hard ball tactics ended up hurting both companies.

Negotiators need to take the time to study negotiations that don’t end well. The negotiators that were involved in these negotiations wanted to reach a successful outcome just as much as we do. However, events took a turn and they ended up having to deal with a negotiation that was a failure. We’d prefer to not find ourselves in a similar position and so take the time to study these three negotiations. Understand what went wrong and then in your next negotiation make sure that you don’t make the same mistakes!

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: If you find that your negotiation is heading for a classic failure, what steps can you take to save it?

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What We’ll Be Talking About Next Time

So what are the most important skills for a negotiator to have? There are many of them; however, hopefully we’d all agree that the bargaining skills and tactics for building trust while negotiating are among the most important. Each time that we start a negotiation we all share the same hopes, dreams and goals: we want to share information, build a relationship, and be treated fairly by the other side. This is all fine; however, all too often when talks get started, most of us have also had the experience of holding back information, viewing the other side’s behavior with suspicion, and feeling distrusted by them. How can you get negotiations with the other side off to a trusting start?