Case Study: The Music Business

Today I thought it would be interesting to take and dissect a real negotiation to see some of the concepts in action.  So here is the setup, I’ve obscured some of the facts to protect the guilty:

Parties Involved:

1.  Record Company – Very large entertainment company

2.  The Band – Very popular band with strong sales performance (i.e. 15 million +).  A band member  died tragically many years ago and the band had limited success after.

3.  Managers – Representing both the band and the estate of the singer.

Situation:

The managers approached the record company with the idea of releasing a live album that was recorded right before the band member passed away, his final set.  The record company is definitely interested in the release, not only will it drive sales on the new live album but will also create a marketing event that will drive sales on all of the prior releases (the catalog).  Little known secret in the music biz, you make all your money on catalog exploitation.  The record company went ahead and submitted a proposal for the project.  The proposal consisted of a single figure, the advance amount ($400k).  Here’s the response the managers sent to the record company:

We could not, in good conscience, approach our clients with this offer.  When [the record company] is ready to offer something respectful of a 22 million seller, we’ll open discussions back up.

The issue is how do you respond?

The answer in tomorrow’s post………


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