Strengthening Negotiating Power: Strategies for Optimizing With a Limited Best Alternative to a Negotiated Agreement (BATNA)
In the summer of 2015, Disney made a bold move in its negotiations with U.S. theater owners over the release of Avengers: Age of Ultron. The film went on to have the second-biggest opening weekend ever in the United States, making it a win-win for theater owners and the film's studio. However, the negotiations were not without controversy.
Disney's licensing agreement terms tightened control over pricing and revenue sharing, aiming to maximise studio profits. The studio demanded that discounted matinee showings end at 5 p.m. instead of 6 p.m. and required that box-office revenue splits be based on the National Association of Theatre Owners’ average ticket price ($8.12), effectively forcing smaller theaters charging less to pay the difference into a revenue pool.
The theater owners faced a weak Best Alternative to a Negotiated Agreement (BATNA) since the film’s box office potential was significant and critical for their business. This gave Disney strong leverage to use hardball tactics, pressing theater owners to accept terms unfavourable to smaller or discount theaters. The National Association of Theatre Owners received many complaints and sent a letter expressing widespread concerns about these demands.
However, Disney eventually backed down from its demands, retreating from its demand to change the end time for matinee pricing and expressing willingness to be flexible with small-market theaters. This move was crucial in avoiding escalation, as refusing to screen the latest Avengers film could have been destructive to all parties involved.
The example of Disney's negotiation with theater owners shows the importance of considering potential legal repercussions of proposals in negotiations. The theater owners' trade group warned that Disney's demands could violate antitrust laws, which might have been a wake-up call for Disney. Presenting a contract as a fait accompli can have a powerful psychological influence on a counterpart, but it can also inspire rebellion if pushed too far.
Finding strength in numbers can be a powerful strategy in negotiations, particularly when faced with a powerful counterpart. The theater owners were wise to allow their trade group to speak for them in one voice, as competitors can often gain power—and even improve their own BATNA—by teaming up.
The four negotiation tactics for dealing with an unappealing BATNA include: evaluating your alternatives, identifying the other party's alternatives, considering the other party's needs, and being willing to walk away if necessary. The example of Disney's negotiation with theater owners offers a real-world illustration of the value of teaming up with competitors in negotiations.
Disney's demands were seen as hardball negotiation tactics and received criticism from theater owners, particularly because of the use of the average ticket price as a nationwide standard. However, Disney's impressive hit record did not give it a free pass with theater owners, as its best alternatives to a negotiated agreement with the major theater chains were bleak. Disney's recognition that its BATNA was not as strong as it might have believed highlights the importance of considering one's BATNA in negotiations.
In conclusion, the negotiations between Disney and theater owners over Avengers: Age of Ultron serve as a valuable lesson in the importance of considering potential legal repercussions, finding strength in numbers, and being willing to walk away when necessary in negotiations.
- In the case of Disney's negotiation with theater owners, understanding potential legal repercussions of proposals is crucial to maintain a fair negotiation process.
- The theater owners' union was wise to join forces, as combining forces can enhance negotiation power and improve a BATNA (Best Alternative to a Negotiated Agreement).
- A powerful strategy in negotiations includes evaluating your alternatives, identifying the other party's alternatives, considering the other party's needs, and being prepared to walk away if the terms are not favorable.
- Disney's hardball tactics received backlash from theater owners, particularly due to the use of a national average ticket price, which further emphasizes the importance of considering one's BATNA (Best Alternative to a Negotiated Agreement) in negotiations.
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