Tag: #extremecontracts

This is a guest blog post by Jacopo Romei. Author of the Italian version of the book #ExtremeContracts, and author of an upcoming book on the same topic in English.

Being part of an underground band is not easy. You are weak in every aspect of your business model. You have no stable audience, you have very thin revenues, you have to accommodate your “real life” needs and, above all, organizing gigs is a nightmare. Trying to negotiate a good deal with the owner of a club you like can be very, very hard. This is the story of how putting yourself in their shoes could make a better negotiation strategy.

Trying to negotiate a good deal with the owner of a club you like can be very, very hard for a rock band. This is how to create a better negotiation strategy.

Since 2003 I have been part of Anonima Armonisti, an a cappella band: no instruments, voices only. After the first few years setting up our repertoire and fine-tuning our live show, in 2007 our popularity had a boost. While the band was still in a niche, a few TV appearances, a few performances in some important theaters, and a couple of published records made us quite known across Italy, to the point of being featured in the Italian edition of Rolling Stone magazine in 2012.

Despite this success, though, the majority of our concerts were still taking place in clubs. In 2009 alone, we were on stage 44 times and the relationship with the club owners had become critical for the survival of our band. The sustainability of our activity was totally dependent on their decisions: they were the ones who paid us, who gave us a stage, who provided the sound system and the right structure to make our concerts possible and enjoyable for an audience that sometimes reached a thousand people.

The relationship with the club owners had become critical for the survival of our band.

The negotiation with them usually happened along a fixed sequence of steps. We had to find, and introduce ourselves to the owners of the clubs where we wanted to perform. 

The club owners—no matter how loyal our growing audience had become over the years—insisted on us providing a guaranteed minimum number of attendees. Worse: reaching those minimum audience numbers usually became a condition to get paid after the show, as the club owner wanted to keep the freedom to cut or suspend our fee in case of a turnout below their expectations. 

At that point, after the fee was set, we started trying to schedule the concert, looking for a date that was suitable for the seven band members and the club itself. From then on, it was all about promoting the gig and hoping we could bring a big-enough audience to enjoy the performance, otherwise we would have to perform and wouldn’t get paid!

Their problem is a part of our problem

The negotiation process felt like pushing a rock uphill with the constant threat of having it roll over us. It was the opposite of a lean process!

1. Finding the right place, taking into account space, the stage, the sound system, and the geographical position according to our goals and how easy it was to get to the venue.
2. Actually begging to schedule a date, giving the club owners many guarantees and not getting any from them. I often wondered about this: wasn’t having people attend the gig a shared interest between us and the club owner?
3. Negotiating a fair fee, that matched the true value generated by our performance, both for the audience and for the club owner.
4. A cumbersome process to find a good date among us singers and then negotiate that date into the club’s schedule.
5. Struggling to gather an audience for that date, now become a Damocles Spade hanging over our heads. An important football match could be enough to spoil our party and leave us with an empty club.
6. Performing.
7. (Struggling to) Be paid.

I was then looking for a different negotiation process that may be more streamlined, less prone to failure, more linear, in one word I wanted to negotiate Anonima Armonisti’s gigs in a way that would allow us to delay commitment until we were sure the most important risk was covered, for us, and the club owner. In short, the lean way.

I was looking for a lean negotiation process

I wanted the agreement to guarantee us:

• More options about the club, according to many variables, especially size.
• A fee correlated to our music and how much our fans liked it, not to the amount of people collected. We are a band, not a PR agency!
• A compensation proportional to the audience size, for better or worse, through thick and thin.
• The chance to schedule the date with less friction.
• Zero risks of singing in front of an empty room.
• Certainty to be paid, with no exposure to last-minute surprises and the owner’s attempts to shave the price down a bit.

At that point, I realized that it made no sense to pursue only our needs without acknowledging the club owners’ needs. I thought that maybe I could use their needs as a True North towards my own goals. As someone said before me, I had to find a way to help them to help me. So I started making assumptions on… their assumptions.

Probably these were their needs:

• Zero risk of losing money by having us perform to an empty room. A club only has a fixed amount of available dates per year. It is crucial for them to maximize the generated value per single day and the audience is the main driver for them to reach this goal.
• Making sure that their revenue—basically selling drinks and maybe food—stayed independent from the quality of our show. They usually want people to be entertained while they spend money eating and drinking so the owners perceive the artist’s fee just as a cost to be capped as low as possible. Given that, our interests were not aligned until we were able to separate their revenue from our revenue.
• The opportunity to schedule the gigs on a date that suits the club’s calendar, with enough time notice. Concerts have to be scheduled way ahead of the actual date, to increase the chance to build a substantial audience, and club owners were looking for peace of mind by literally building an inventory of gigs further into the future. 
• No revenue share for the artist. Their bar-generated money stays theirs, while the artists get a fixed fee agreed upfront or, if the money is linked to the size of the audience, its amount is capped to a maximum. There has to be no open upside for the artists, they are a commodity because running a club is far riskier.

All these needs are legitimate. Dismissing them would not lead to a successful agreement in which they only care about setting up a nice venue and serving good drinks and food, we only focus on music and the performance, and everybody cares about the number of people attending the concert. How could we design and set up an agreement to take care of all this?

A new approach to selling our live performances

At the end of 2014, building on top of my experience with a few start-ups trying to validate their business models and strongly influenced by Steve Blank, I had an idea that returned interesting results.

Without even alerting my fellow bandmates about my intentions, I asked them whether they were all free on some date in the following months. Then, I chose the first date that suited all of us and asked them all to keep it free. At this point, I started assuming we would have a concert in Milan on that day. Milan was perfect for the experiment because it is a big enough city. We had many fans there, having already been primed by two or three concerts in local clubs. And I was also attracted by a few fans who had been requesting us to play in their town for a long time.

I chose a popular ticket platform that I had experience with, from selling tickets to more or less nerd-ish conferences and meetups I had helped to organize. Not even knowing what club we would be performing in, I started pre-selling 100 tickets at a very low price, on the set date. I promised the buyers that in case we had missed a given goal within the first few weeks, I would give the money back, no questions asked.

Not even knowing what club we would be performing in, I started pre-selling 100 tickets at a very low price.

After having sold the first 100 tickets two months ahead of the scheduled date and with a 50-person waiting list, I started scouting for a good club in Milan with the following pitch for the owners of the most interesting clubs: “I’ve got 100 people who already bought the ticket for our show on this date. Fifty more people asked me for tickets and are waiting for us to confirm the event. We still have three months to go and I don’t want a dime from you. If you let us perform on your stage, we bring them all to drink at your bar”.

I still remember how loud the high-five was! In no time, we had a scheduled gig and now we also had a deal with a very nice club with a very nice stage.

I still remember how loud the high-five was! In no time, we had a scheduled gig and now we also had a deal with a very nice club with a very nice stage. We opened the box office again and we ended up selling hundreds of tickets! Win (for us), win (for the club owners), win (for the audience)! This was what my Extreme Contracts approach delivered: a triple win! No pain, no upfront risks (for anyone!), and a scheduled date for a top club in Milan.

By changing the order of the steps in the process we had changed the result. Our new process for setting up a concert in a top club looked like this:

1. An exhausting internal negotiation to find a suitable date was not needed anymore. Picking up the first free date at the intersection of our calendars was enough.
2. The search for an audience was not on the critical path anymore. Damocles was freed from his spade and not finding an audience just started meaning canceling a tentative date and refunding the initial buyers.
3. We were earning money without begging. Those buying a ticket from us in advance were doing so because they really wanted to attend our show and, not a small thing, they were sure they would get their money back in case of a cancellation.
4. We were getting paid in advance (the tickets were pre-sold), with no loss exposure for us even for expenses and rehearsals, and we were no longer afraid of being paid less or nothing in the end.
5. We were performing in the right clubs, from all points of view, no room wasted nor the risk to invite too many people. Finally, we were able to introduce ourselves to the club owners having the upper hand in the negotiation: “hey man, I’ve got some value in the vault and it’s my vault. Do you want a share?”

Once we found the club, we were left with the pleasure of performing in front of an audience that was there for us and deserved to be entertained.

What about the owners’ needs? Were we taking care of them this way? Or not? 

Our solution is their solution

This process puts the owners’ needs at the center of the solution. Each of their needs was addressed because we tried to think how they thought and we tried to feel what they felt: we walked in their shoes.

This process puts the owners’ needs at the center of the solution. Each of their needs was addressed because we tried to think how they thought and we tried to feel what they felt: we walked in their shoes.

Let’s see this in detail:

1. They took no risks of an empty club. A club only had to commit for a date which all the audience—or at least a minimum number of people—had already shown commitment for. This was much better than hoping to see people attending a concert.
2. They could decouple their drinks-and-food business from the quality of our show. We might even have proved to be unable to perform live and the maximum impact for the club owner would be the decision not to let us perform again. But the single date, that single first date was secured. No exposure for them, an audience that would drink and eat no matter the quality of the show, and the free option to renew the partnership with us or let us go.
3. The gigs were scheduled on a set date, with no ambiguity and no need to wait for its confirmation: it was all set! The show was only scheduled when there was already a “minimum viable audience” for it. We had the audience that had committed to attend by paying in advance, and we had a clear date in the calendar. No room was left for fluctuations. The owners could rely on a filled slot in their schedule.
4. No interference with their revenues. We were not asking for shared revenues, we were not linking our finance to theirs. We had our money, coming from our fans’ love for our music, they had theirs, coming from the quality of their service, drinks, and food.

All of a sudden, everything had turned for the better, the negotiation had become frictionless. This is the keyword: frictionless. You don’t want to feel like pushing a rock uphill every time you meet a new customer or a new supplier. You don’t want to spend an enormous amount of time, energy, and enthusiasm for every single negotiation. You want it to flow naturally, easily. As Ury and Fisher state in their bestseller “Getting to Yes”, the best negotiation process is the one that takes care of the substance of the agreement, sure, but still preserving efficiency and a good relationship between the parties. In one word, keeping it frictionless. 

One of the best ways to get there is to focus on the negotiation process on the needs of the other party so that we design and make them accept an effective solution while we serve our needs. Extreme Contracts practitioners call this principle In Their Shoes.

Here’s Jacopo and the band with the amazing a capella cover for Disturbia