A television production company was recently trying to sell the syndication rights for a popular sitcom to an independent station in one of the three largest U.S. broadcast markets. Both parties were eager to close the deal, but they had very different expectations about the program’s ratings. The producer was confident that the sitcom would grab at least a 9% share of the audience in its early-evening time slot. The station felt the show wouldn’t garner more than a 7% share. Because each share point was worth about $1 million in advertising revenue, the difference in expectations translated into very different ideas about what the rights to the show were worth. After many heated debates, the negotiations broke down. The producer forfeited the market, and the television station bought a less attractive program to fill out its schedule.
Betting on the Future: The Virtues of Contingent Contracts
Many negotiations collapse over differences of opinion about how the future will unfold. Companies need to realize that it’s often better to bet on uncertain events than to argue about them.
A version of this article appeared in the September–October 1999 issue of Harvard Business Review.
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