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Part
One
By Harlington L. Hanna
Jr.
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Introduction
Before attempting to effectively negotiate the
acquisition of privately held I.Ps. a significant amount
of knowledge must be attained and a systematic approach
must be developed and utilized. Remember this is the
ultimate in deal making and this is what separates the
men from the boys the women from the girls. To be
successful over the long run you must take a professional
approach and become a true professional in this
arena.
The acquirer must keep in mind at all times that he or
she is ultimately negotiating to obtain the valuable or
potentially valuable rights in some type of product which
usually has a physical presence. The physical product
although valuable itself is not the goal of this exercise
although it may be intrinsically tied and wrapped up in
the same deal.
The acquisition process is many times an effort
involving much more than a simple buy and sell
transaction, and can involve complex contractual
agreements between multiple parties involved in the
ultimate exploitation of the Intellectual Property.
There is no one way to negotiate and contract, there
may be many ways to reach the same result. Successful
negotiators bring a tremendous amount of knowledge and
shills to the table. There is no way to really teach a
person to be a successful negotiator. They must acquire
all the knowledge and experience they can and learn to
repair potentially bad decisions and mistakes to prevent
a bad situation getting worse. They must be flexible and
pragmatic, confident but watchful, honest, credible and
trustworthy.
This treatise of the subject matter will utilize the
acquisition of entertainment based I.Ps. in order to
discuss the subject. Remember however that many of the
process and strategies discussed can be extrapolated to
other areas, but a key element is a complete and
continuing knowledge of the particular industry or area
involved. If you do not understand the industry or area
thoroughly you will probably not be successful over the
long haul.
The negotiation process is a two part event and can be
evaluated and discussed from both sides, and should be
evaluated from both sides. Where ever possible the
following discussion attempts to look at the issues from
both sides. Reviewers of this treatise must be careful to
understand where they sit at the table and review the
contents from that perspective.
The entertainment business is an excellent example for
the review of the subject of negotiating the acquisition
of privately held I.Ps. This is so because the
entertainment industry is perhaps the most mature
industry as it relates to I.Ps. in general and it is the
industry where more I.Ps, are developed on a day to day
basis, providing many opportunities for private
acquisitions. The Entertainment industry also provides a
more complex and sophisticated I.P. structure due to
their longevity in the I.P. arena and their tremendous
dependence on I.P. related income for most of their
revenues. They have paved the way and developed
additional rules, regulations, laws, customs, and
practices which preserve the rights to I.P. protection
and related revenues. These serve as excellent examples
and precedent setting guidelines for other industries. A
thorough understanding of I.P. acquisitions in the
entertainment arena will cover almost all the important
points and serve as an excellent base from which to
expand your acquisition efforts in other arenas.
This industry is also a good choice for the discussion
since many of the individuals and companies involved with
the Hannaian Business Network, whom this discussion was
developed for, operate entertainment based or related
businesses.
Negotiating Entertainment I.P.s.
The business value of an entertainment production
involves quite a bit more than its esthetic value. How
well a song, book or movie may appeal to any particular
audience is really only a small part of the picture that
the entertainment entrepreneur must evaluate. In fact all
things being equal many more factors dealing with the
legal and business aspects of the project are important
to consider before further time, effort and other
resources are expended on the project. It is essential
that as much of these factors be researched and
considered before moving ahead on the project. Many times
what seems to be an attractive project after initial
evaluation of the production, turns out to be far from
attractive after even a cursory evaluation of the legal
and business aspects surrounding the project. Both
entrepreneurs and artists and producers should evaluate
these factors as much before hand to establish value,
minimize potential frustrations, disappointments,
misunderstandings and loss of financial and other
resources. Artists and producers who desire to be
business ready and place themselves at the front of the
line in this buyers market must give as much attention to
the legal and business factors as the artistic and
esthetic ones. For an example of a system to establish
value see "The Hannaian Quality Assurance Principles
& Checklist". Also carefully review "Understanding
and Valuing Intellectual Properties".
A Buyers Marketplace
Fortunately for the entrepreneur, and unfortunately
for the producer, the marketplace for transacting
entertainment properties is primarily a buyers market.
There are many more producers of entertainment properties
than there are buyers or exploiters and so the
entrepreneur many times can acquire potentially valuable
property rights for a reasonable fee or through
reasonable efforts. Today due to the proliferation of
inexpensive computerization as a means of producing
excellent quality productions, the already overburdened
marketplace has become flooded with quality productions,
all seeking their day in the sun, but in reality with no
place too go unless the entertainment entrepreneur can
take them somewhere. It is amazing that so many producers
and potential producers in the marketplace do not realize
this one important fact. The fact is that many many
people are talented at production, many many people are
attracted by production, many many products are available
to help many many people produce many many productions,
but sadly there are not many many outlets available to
reap significant financial rewards for the exploitation
of these many many productions.
Businessmen in Control
In negotiating I.P. contracts always remember the
party most representative of the businessman in the
project will always be in control. Business people are
really the ones that make the market and ultimately
provide the widespread success of any particular product.
They are the real players, they make the market, they
control distribution, publishing and administration, and
they take most of the financial risks and exert most of
the control in the ultimate process and venture. Artists
and producers can only exert complete control and
influence once they become well known and famous in their
own right. Even then their influence and control depends
on just how much of a businessperson they have become, or
how much of the businessman's role they are willing and
able to perform. This is an important factor in
negotiating contracts because it sets the stage for the
negotiations in general. Unfortunately though it may be
an equitable idea that most negotiations begin with
equally powerful parties on each side of the table, this
is generally not the case, one or the other party
generally begins with the upper hand, and usually it is
the businessman. If this concept is true then I.P.
negotiators should understand that the more they
represent the businessman's role in the negotiations, the
more likely it is that they will have the upper hand.
Finding the money in entertainment is first
recognizing who the real money players are in
Entertainment. If you are an artist or author and intend
to make your money by producing or performing
entertainment productions, realize that you are right at
the bottom of the hierarchical pyramid of players, and
that there are a lot more of you than there are of any
other player in the marketplace. Yes you may become a
major star and make a lot of money, but the odds are slim
and the road difficult because you have all those other
players positioned better than you in the business
marketplace. Even if you become a huge mega star that
there will always be someone else making more money than
you. After all someone has to pay you the big bucks you
hope to make. Any way you cut the cake, the more you are
involved with the business aspects of the marketplace,
the more you are a business player in the marketplace,
the more certain you are to make some money.
There are certain strategies which will help the
entertainment entrepreneur gain access to success in the
marketplace and which will facilitate the acquisition of
equity and options for a controlling participation in the
project or venture.
Part
Two 