10 Negotiation Lessons from Disney's CEO

Shortly after being named Disney’s CEO, Bob Iger negotiated peace with then disgruntled and former board member Roy Disney (Walt’s nephew). Roy had just sued Disney over Iger’s selection and it easily could have derailed Iger’s effort to lead Disney in a bold new direction.

Iger wrote in his bestselling autobiography The Ride of a Lifetime: Lessons Learned from 15 years as CEO of the Walt Disney Company, that the:

“drama with Roy reinforced something that tends not to get enough attention when people talk about succeeding in business, which is: Don’t let your ego get in the way of making the best possible decision. . . .

I certainly could have gone to battle with them and prevailed, but it all would have come at a huge cost to the company and been a giant distraction from what really mattered. [We needed to] recognize that what Roy needed, ultimately, was to feel respected. That was precious to him, and it cost me and the company so little.

A little respect goes a long way, and the absence of it is often very costly.”

Latz Lessons: Treat your counterparts with respect and let them walk away with it intact

Here are more negotiation nuggets from Iger, plus my own thoughts

• Regarding a renegotiated partnership between Disney and Steve Jobs’ Pixar Animation Studio, “after each round of negotiations, [we would] ask ourselves if we were crazy to not just make any deal with Steve, but then we’d quickly conclude that any deal we made had to have long-term value.”

Marty Latz: It’s easy to lose sight of your long-term objectives in complicated negotiations. Don’t. Keep them front-and-center, ideally in a written Strategic Negotiation Plan that you can reference and update as the negotiations proceed.

Latz Lessons: Put your ego in your back pocket and focus on your long-term goals

• Iger then decided Disney should acquire Pixar instead. He wrote “[b]efore I dialed [Steve], I told myself that I should contain my enthusiasm. I needed to offer praise, because Steve’s pride in Pixar was enormous, but this might be the beginning of a real negotiation, and I didn’t want him to feel that I was so desperate for what they had that he could ask for the moon. The moment I got Steve on the phone, any semblance of a poker face collapsed. I couldn’t pretend I felt anything other than pure enthusiasm. . . . I hoped that my honesty would ultimately serve me better than any ‘shrewd’ pretense anyway. It could have seemed like a weakness – if you show that you want something so badly you’ll be made to pay – but in this case the genuine enthusiasm worked.”

ML: Don’t discount the true power of sincerity and enthusiasm and making true connections with your counterpart (especially creative types like Steve Jobs), even if it might appear to weaken your leverage.

Latz Lessons: Don’t discount the true power of sincerity and enthusiasm and real connections

• Disney later also acquired Marvel Entertainment, then controlled by Ike Perlmutter, “a legendarily tough, reclusive character, former Israeli military, who never appeared in public or allowed pictures of himself to be taken.” Before even meeting Perlmutter, Iger wrote that he knew that “if [Perlmutter] was going to be comfortable selling to Disney, he had to feel like he was dealing with someone who was being authentic and straight with him, and who spoke a language he understood.” Despite being from vastly different backgrounds, Iger suggested Ike and his wife join Iger and his wife for dinner. Iger indicated “[t]here wasn’t any business talk, it was just a chance to give them a sense of who we were and what was important to us, and for us to get a sense of who they were, too.”

ML: Rapport-building on issues unrelated to the business issues on the negotiation table was crucial.

• Perlmutter was a somewhat reluctant seller, though, and it took a call from Steve Jobs to move it forward. Iger wrote that “Steve told [Ike] that the [Pixar-Disney] deal far exceeded his expectations, because [Iger had] lived up to [his] word and respected the [Pixar] brand and the people. Later, after [the] deal closed, Ike told [Iger] that he’d still had his doubts and the call from Steve made a big difference to him. ‘He said you were true to your word,’ Ike said.

ML: This deal would not have closed but for Iger’s reputation as an honest and straightforward negotiator who made and fulfilled his commitments – and had former counterparts like Steve Jobs willing to tell others this. Iger’s reputation for ethics and integrity made a multi-billion dollar difference.

Latz Lesson: Build a reputation for integrity (what counterparts say about you after the deal).

• Iger negotiated the $4.05 billion purchase of Lucasfilm from George Lucas – the creator of all things Star Wars – and wrote of the negotiation:

“[t]he worst thing you can do when entering into a negotiation is to suggest or promise something because you know the other person wants to hear it, only to have to reverse course later. You have to be clear about where you stand from the beginning. I knew if I misled George [about the overall range of the purchase price], simply to begin the bargaining process, or to keep the conversation going, it would ultimately backfire on me.”

ML: Iger knew Lucas initially had unrealistic expectations of the value of Lucasfilm given Disney’s previous purchase price of Pixar. So, rather than initially validate it and then negotiate down just to get going, Iger was blunt at the start. Importantly, however, he “explained why” and how the Pixar deal differed from a market perspective (focusing on my Third Golden Rule: Employ “Fair” Objective Criteria).

• After agreeing on a purchase price, Iger said:

“[t]hen the more difficult negotiations began over what George’s creative involvement would be. . . . [George] wanted to retain that [creative] control without becoming an employee. It would have been a dereliction of my responsibilities to spend more than $4 billion and then say, essentially, This is still yours. Go ahead and make whatever movies you want to make on whatever timeline you can make them. . . . We went over and over the same ground – George saying he couldn’t just hand over his legacy, me saying we couldn’t buy it and not control it – and twice walked away from the table and called the deal off (We walked the first time and George walked the second.)”

ML: Price is not always the most critical issue, and walking away from the table over a crucial issue doesn’t necessarily mean the negotiations are over. Sometimes walking just signals that the issue at hand is vital.

• Iger wrote that “[i]t was an upcoming change in capital gains laws that eventually salvaged the negotiations. If we didn’t close the deal by the end of 2012, George, who owned Lucasfilm outright, would take a roughly $500 million hit on the sale. If he was going to sell to us, there was some financial urgency to come to an agreement quickly.” [This pushed them to resolve the control issue, with Lucas agreeing to consult with Disney on its Star Wars efforts.]

ML: Independent inflexible deadlines with significant financial consequences often drive the negotiation agenda.

• Regarding his offer-concession strategy in outbidding Comcast to purchase 21st Century Fox from Rupert Murdoch for $38 per share, which translated to over $71 billion, Iger wrote: “[a]s for the $38 price, I suspected that Comcast could possibly go higher than what they’d already bid [which was $35/share], and that if we went to $35, they’d go to $36. If we went to $36, they’d go to $37, at each stage convincing themselves that it’s only a little more, until eventually we’d go up to $40 per share. Whereas if we started at $38, they’d have to think hard about going up at least $3 per share.” He was right, as Comcast dropped out after Disney bid $38.

ML: Pay close attention to the psychology involved in the offer-concession stage of the process and put yourselves in the shoes of how your counterpart might make its offer-concession decisions. In short, game it out, then decide your move.

• Finally, in his summary of business lessons learned, Iger wrote “In any negotiation, be clear about where you stand from the beginning. There’s no short-term gain that’s worth the long-term erosion of trust that occurs when you go back on the expectation you created early on.”

• He also wrote “Most deals are personal. This is even more true if you’re negotiating with someone over something he or she has created. You have to know what you want out of any deal, but to get there you also need to be aware of what’s at stake for the other person.”

ML: Know your long-term goals and objectives and also, always, be aware of your counterparts’ goals and interests.

Latz’s Lesson: Address unrealistic expectations with independent standards, know that price may not be the real dealbreaker, use deadlines to your advantage, game for the psychological element in your offer-concession moves, and be aware of your and your counterparts’ goals and interests.

* Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He can be reached at 480.951.3222 or Marty@LatzNegotiation.com.