It isn’t often that I’ll pen an article about President Donald Trump and this column is certainly not meant to be political in nature nor offer commentary on his politics. But recently, Trump took part in a historic second summit with North Korean leader Kim Jong-un. Putting aside the political analysis, our commander in chief went to the summit with the goal of North Korea agreeing to disarm its nuclear weapons arsenal. As the world saw, he walked away from the summit without a deal and proclaimed, “Sometimes you have to walk, and this was just one of those times.”
While I was sitting in my office in the midst of selecting the topic for this article, I heard the President’s words on the television. Throughout my career I have spent a tremendous amount of time analyzing and writing about different laws and regulations from 18 USC 2257, to the DMCA and the GDPR. With all of the existing and new laws and regulations that affect the adult industry, it’s no wonder that adequate time and writing space isn’t left for topics such as contracts and negotiating deals. The fact is that articles about contracts and negotiations aren’t exactly the most headline-stealing types of writing pieces. But courtesy of Trump’s reminder, there is an important lesson to learn.
The negotiation process in any deal is not a sprint, it is a marathon. The best negotiators are always the most patient ones.
Anybody who has been in the adult entertainment industry in the past eight years or so has been no stranger to headlines involving mergers, acquisitions and press releases announcing strategic partnerships. Despite all of these headlines, the fact is that for each transaction announcement there are dozens if not hundreds of other deals that didn’t come to fruition.
Whether you are in the process of negotiating the purchase of a website or simply negotiating a new deal with your hosting provider, you need to be skilled in the art of negotiation or hire someone who is. Contrary to the majority opinion, bad deals and contracts don’t come about from a bad product, but more times than not occur because of poor negotiating skills.
Let’s start with the most basic and important rule when it comes to negotiating a deal, keep emotions out of it. If you don’t have the strength or skill to keep your emotions out of a negotiation, then remove yourself and hire someone who can. The perfect example is when a potential buyer “falls in love” with a particular item such as real estate or a car. In this situation the potential buyer is already in an inferior position vs. the potential seller because the potential buyer’s judgment has been impaired by his emotions. How many of you reading this article have overpaid for a house or car because you loved it before starting the negotiating process? I admit that I have, and I would bet that almost all of you have as well. This rule isn’t limited to physical items like cars and houses; every single day deals are reached where a business is purchased for far more than it’s worth because the buyer has some emotional attachment to the business. As a way to combat this “falling in love effect” make a list of all of the things you don’t like about a particular item or business before you start negotiating.
The second most important rule when it comes to negotiating is knowing from the start that everything is negotiable. If you don’t propose or bring up something during the course of a negotiation, then you are only shooting yourself in the foot. Assuming that the other side of the equation isn’t willing to negotiate something is poor negotiating and again puts you at a disadvantage. As an example — contracts often contain terms (one-year vs. three-year etc.) and renewal terms, yet far too many people simply sign the contract as presented and don’t propose a different term. The reasoning is often the same … people make the mistake of assuming that because something is written that it is non-negotiable. The correct way to think is that everything is negotiable, and nothing is final until the parties sign the contract.
The third most important rule when it comes to negotiating is to research everything you possibly can about the subject of the negotiation. For this rule, the easiest way to explain is to talk about one of the worst business decisions in history. Approximately 19 years ago, Reed Hastings, co-founder of a tiny company called Netflix (I admit that Netflix is slightly bigger than tiny), approached former Blockbuster CEO John Antioco and asked for $50 million in exchange for Netflix. Mr. Antioco believed that Netflix would amount to nothing more than a “very small niche business.” In an interview to the Unofficial Stanford blog, then-CFO of Netflix Barry McCarthy reported that the streaming service proposed running Blockbuster’s online brand and that Blockbuster could run Netflix’s in-store brand.
Per Mr. McCarthy, “They just about laughed us out of their office.” It was reported that Blockbuster ended negotiations shortly after. Today, Netflix has a market cap of $154 billion and Blockbuster died in bankruptcy court. Mr. McCarthy went on to say that Blockbuster ended up competing with a business that it initially ignored. I wonder if back in 2000, Blockbuster did their homework, because if they had they would have known that Netflix had re-engineered its website to support a subscription model (in 1998 Netflix did $1 million in revenue, in 1999 Netflix did $5 million, followed by $35 million, $75 million, $150 million and now over $1 billion). I’m guessing that Blockbuster executives now wish that time machines were real.
The fourth most important rule is to never negotiate against yourself. The negotiation process in any deal is not a sprint, it is a marathon. The best negotiators are always the most patient ones. Here is the perfect example to illustrate this point: Bob wants to purchase a domain name from Julia and offers $5,000. Julia responds by saying that Bob’s offer is too low. Instead of Bob pressing Julia for a counter-offer, Bob offers $10,000. Julia then accepts Bob’s $10,000 when in reality she would have sold the domain to Bob for $6,000. In this instance, Bob’s impatience cost him $4,000. Time and time again, impatient negotiators lose out to patient negotiators.
The last negotiating rule that I’m going to discuss and was the primary motivation for writing this article, is knowing when it’s time to walk away. Regardless of your best intentions when going into a negotiation, you need to have the right mindset and be prepared to walk away. Bad deals often happen because one side is either too emotionally vested or unskilled as a negotiator to know that no deal is always better than a bad deal. Buyers in negotiations often fear that if they don’t make a deal for a purchase that someone else will swoop in or they will miss out on a “once-in-a-lifetime opportunity.” That line of thinking is broken from the start.
Case-in-point, a few years ago I had a client interested in purchasing a content streaming website. The seller of the website wanted more than 20 times the website’s value as determined by a team of the seller’s own accountants. After two months of exhaustive negotiating, I advised my client that it was time to walk away. My client argued that he “couldn’t walk away” because he’d lose the chance to purchase the website. My client finally listened to my advice and we ended negotiations. Four weeks later, the seller contacted me after not finding any other buyer and ultimately my client purchased the website for only 1.8 times the website’s value. Walking away doesn’t necessarily mean permanently in the negotiating context.
The reality is that negotiating is a combination of both art and science and it’s important to recognize that if negotiating isn’t your strong suit, you can always hire someone who possesses the skill. Becoming a skilled negotiator doesn’t occur overnight, it takes countless instances of negotiating to develop the skill. Try the tips that are discussed in this article; I promise that they will only help you improve your negotiating skills.
This article does not constitute legal advice and is provided for your information only and should not be relied upon in lieu of consultation with legal advisors in your own jurisdiction. It may not be current as the laws in this area change frequently. Transmission of the information contained in this article is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver.
Corey D. Silverstein is the managing and founding member of the Law Offices of Corey D. Silverstein, P.C. His practice focuses on representing all areas of the adult industry and his clientele includes hosting companies, affiliate programs, content producers, processors, designers, developers, operators and more. He is licensed in numerous jurisdictions including Michigan, Arizona, the District of Colombia, Georgia and New York. Contact him at MyAdultAttorney.com, corey@silversteinlegal.com and (248)290-0655.
