The Negotiation Menace: A Star Wars Story

( This is authored by Ayaan Yusufzai Khan and Ananya Krishnan of ILS Law College, Pune. )

It is said that a gain or a loss that is momentary is not actually real. Disney’s acquisition of Lucasfilm, (the production house behind the international sensation, the Star Wars franchise) aptly captures this sentiment. However, it has been acclaimed by critics as one of the greatest sales agreements to have ever taken place in Hollywood. To understand this negotiation better, reference will first be made to works of distinguished authors. Thereafter, Lucas’ approach will be compared to the established tenets of conducting negotiations. Finally, a possible framework that could have been employed will be explored.

Background Of The Negotiation

Lucasfilm was represented by its sole shareholder, George Lucas, who had decided to sell his company owing to certain personal and professional reasons. He was skeptical of an arrangement with Disney having faced problems of creative autonomy with other production houses in the past. In view thereof, Lucas personally saw the negotiation through.

Disney, on the other hand, was no stranger to the Star Wars franchise. Its CEO, Robert A. Iger, who knew Lucas from a previous project and shared a respectable relationship with him, was heading the charge on its behalf. Iger already had multiple successful deals for Disney and the opportunity to bring the brand of Star Wars under the aegis of Disney was what drove his side of the negotiation.

During the negotiations, both parties walked away from the table twice. This was because Lucas' motivation was retaining control over the story (after all it was his own creation) while Disney felt that it was not commercially viable to give Lucas the money and let him control the franchise. Iger’s motivation was complete ownership of the Intellectual Property that Lucas film had already acquired but Lucas walked away because he refused to simply hand over his legacy.

However, after two years of gruesome negotiating, mutual ground was eventually found and the deal was finally signed for $4.05 billion divided in equal parts - cash and Disney stock.

The Agreement And BATNAs Employed By Lucas

Lucas’ Best Alternative to the Negotiated Agreement (BATNA) was simple, he was George Lucas. If the deal with Disney fell through, there would be a line of potential buyers waiting to seize the opportunity. In order to enhance the value of his company in the eyes of its potential buyers, Lucas had been laying the groundwork for a new Star Wars trilogy, hiring a respected screenwriter and talking to the original Star Wars cast about reprising their roles. This is what proved irresistible to Disney; if they walked away, there would be a massive opportunity loss!

Lucas entered the negotiations seeking $7 billion for his company, along with control over it. This position was however not acceptable to Disney. Iger could tell that his friend was not completely satisfied with the way negotiations were going. Therefore, to convince him, Disney decided to purchase the scripts for the next three Star Wars movies (penned down by Lucas), showing that they would continue in the direction he wanted. Further, Lucas was appointed as the “creative consultant”, in other words, Disney’s guide in case they needed creative help with the franchise. They even agreed to his terms that they would not change the staff of Lucasfilm so that Lucas would feel comfortable. However, Disney put in a caveat in the contract that they would have the last say and the right to reject the suggestions provided by Lucas. Over the years, the stories given by him were abandoned by Disney. Thus, negating all that was promised.

Analysing The Negotiations That Ensued

With both parties coming to an agreement, it becomes imperative to analyse the strategies adopted to negotiate this dream deal. This is because subsequent to the agreement, the two parties had a falling out and the deal, while proving to be successful for Disney, was not the same for Lucas.

• Positional Bargaining

Taking up, and giving up, on a series of positions during a negotiation, serves a useful purpose.[1] It provides an anchor for parties to hold on to, in uncertain and pressured situations. However, such techniques of positional bargaining are a double-edged sword. When people start bargaining on the basis of positions, they tend to lock themselves into their positions and eventually begin to identify their egos with it.[2]

As stated earlier, Lucas was of the opinion that he could ask for anything, because he was George Lucas. But in doing so, he made a fundamental mistake that should be avoided in a negotiation - he let the entire discussion revolve around himself and his position. While it is true that the deal was to negotiate the buying of Lucasfilm, Lucas did not realise that he was blinding himself to clues that could lead to a better deal, by being apathetic to the other side’s motivations. Disney on the other hand, adroitly navigated around Lucas’ interests, giving him assurances that they would wriggle out of later on.

• Relevance of the BATNA

Since negotiations have a tendency of pushing parties into pressured situations, a safety net apart from the parties’ own positions is often sought. This comes in the form of a BATNA. Roger Fisher, the creator of the concept of BATNA, set it out as a standard to measure the viability of the proposal made by the other side.[3] When BATNAs are identified before the negotiations, the negotiators arm themselves against having to identify alternatives in pressured situations.[4]

However, the BATNA as identified by Lucas was not as strong as its creator made it out to be. From the very outset, Lucas’ position was that if the negotiations failed with Disney, he would have a string of other buyers lining up for him. While this may have been true to a certain extent, his mindset was guided by emotions as opposed to logical reasoning. Disney played on these very emotions. In this instance, while Lucas started off the negotiation not because he wanted to become rich, but because he believed in the story he wanted to tell, he ended up losing sight of this goal. As a result, he agreed to terms that ensured that all he would be left with when he walks out of the room, is money in his pocket.

A New Approach To Negotiations

While formulating BATNAs, it is important that a person acts on the basis of rational thinking and chooses alternatives with reasonable care. However, one cannot always isolate themselves from their emotions. For that reason, a different approach to negotiations is suggested by the authors. The approach that is proposed, is focused more on interests, in contrast to an alternative-centric approach. In this regard, the negotiators must not focus on the alternatives. They should decide their Zone of Possible Agreement (ZOPA) on the basis of two interest-based tools, which are ‘Deal points’ and ‘trade off points’.

Deal points are those that the person would absolutely want or have an agreement over. Without these, the party would feel that there is no point in negotiating at all. On the other hand, trade off points are the ones that the person can give away or negotiate.[5] These points would provide an adequate interest-based window for the parties to work within. By using these tools, parties would steer clear of agreeing to flashy information that does not fall within their interests and pay more attention to the minor details.

The deal point for Lucas was that he wanted to ensure that the stories he wrote were honoured. The biggest trade off point was money (evidenced by the fact that he agreed to a sum far less than what he initially envisaged). However, the outcome was the exact opposite. He got swayed by the icing that Disney offered on the cake. Had Lucas used an interest-based approach, the agreement might have been more favourable to him.

Concluding Remarks

Today, both parties share a strained relationship. Although he walked out of the room a rich man, the events succeeding the negotiations, left George Lucas with many regrets. Nevertheless, one must note the callousness of Disney throughout the negotiations. They entered the room with a commercial mindset, wanting to own a new business and that is what they achieved. However, the movies made post Lucas’ exit have been negatively received by Star Wars fans to the extent that they want Disney to completely erase the entire trilogy. Thus, while it may seem like Disney won the battle, as to who won the war, is a question yet to be decided.

[1] Roger Fisher and William Ury and Bruce Patton, Getting to YES - Negotiating an agreement without giving in, (Random House Business Books 2nd ed.) (1992). [2] Id. [3] Fisher Supra note 1. [4] H. Lee HETHERINGTO, Planning for Settlement Negotiations: The Big Picture, Family Advocate Vol. 37, No. 3, pp. 9-11 (2015). [5] Id.