Why Spotify and Harry & Meghan’s deal is no longer ‘Cool for Cats'
I wonder if Spotify or Harry & Meghan are obsessed with time, like the iconic band Squeeze and I seem to be. Watching them play a set this weekend (Squeeze that is) several of their tracks have references to time. ‘Cradle to the grave’ for instance, includes lines like:
time is of the essence
time will always tell
time is a great healer
time will not stand still
time will wait for no man
time is on my side
These are all great reminders that time (and its effect on the balance of power) in a negotiation can be viewed very differently dependent upon situation, outlook or urgency.
Were any of these considerations for either Spotify or Harry and Meghan when they agreed an exclusive content deal back in 2020 for $20 million? I’m not sure.
Last week it was announced that both parties were now parting company. The BBC reported that Spotify Chief Executive Daniel Ek in an interview conceded that "You're right in calling out the overpaying and over investing, we're going to be very diligent in how we invest in future content deals," he added. "And the ones that aren't performing, obviously, we won't renew”.
Now, whilst Savage Macbeth would be happy to train, advise and consult with Spotify to help them going forward, there are three main negotiating points I think you can take away from the termination of this arrangement:
This deal was in fact ‘a bet’. A bet that Harry & Meghan’s brand would remain strong enough to justify the price tag that Spotify paid ($20 million). When you’re doing your planning for a deal like this, make sure your team is balanced and objective in their approach. You need people who will look at the upsides and opportunities, but you also need the people who are risk adverse and can see the pitfalls and the dangers (no one person can do both completely objectively). This will provide you with a balanced view of risk and reward.
Don’t always believe that a longer-term contract is better. If you’re in procurement, think about this from the seller’s point of view i.e. have some empathy with them. If there is a risk, a doubt or a concern - a shorter-term agreement may actually be more beneficial for the other side (or maybe both sides). Being tied in for the short time may help them to feel that this mitigates the potential downsides enough for them to try the deal, if only for a short period.
There are lots of opportunities to build time into a deal, retrospective payments, staged reviews, break clauses, payment by results etc. These can all help to mitigate risk when one or both parties feel the burden of the potential pitfalls. Remember things change over time - review changes (and the impact on your objectives, on a regular basis). For example, with Harry & Meghan - babies, court cases, books, TV interviews will all have an impact one way or another.
Failure to think about these kinds of issues in your negotiation planning can really land you ‘Up the Junction’ (another classic song by Squeeze). If you don’t know the track, add it to your Spotify playlist, definitely worth a listen!
Sam Macbeth, 20th June 2023
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