Frasier (A) - Case Solution

Executive summary – Frasier

Mark Graboff was leading a team to negotiate the rights to Frasier for NBC West Coast. The first negotiation period ended with no agreement reached, and NBC’s final act was to let Paramount propose the Last Offer. Analysis of this negotiation reveals that:

1. Two parties both had BATNA, and it seems they were aware of each other’s alternatives;
2. ZOPA for this negotiation was from $2.85 to $6.09 million;
3. It makes sense for NBC to take the final act despite the fact that the current offering was within ZOPA. This is because they had better negotiating power. Thus, they could expect a lower price from the Last Offer. Nevertheless, since the deal would provide more benefits for both parties and there are a lot of risks associated with BATNA, NBC should only pass the Last Offer if it is higher than NBC’s reservation price.

Analysis

Main players and their interests (Exhibit 1)

1. NBC West Coast

Party interests:

1. To keep Frasier: this is one of NBC’s top priorities due to the lack of programming success. Without Frasier, NBC’s Tuesday night would be at risk of becoming a wasteland. Also, NBC could use Frasier as a tent pole to increase viewership for other shows and attract high-premium ads;
2. To minimize loss: NPC prepared to lose money for this show since the current license fee ($5 million) was already much higher than their break-even for the show. Also, speculations from the media ($5.8 million) and press (~$8 million) would make it harder to lower the deal. Therefore, NBC’s top priority is to limit the loss;
3. To prevent a bidding war: if NBC lost Frasier to other networks, they would have to shop for a replacement, thus triggering a bidding war that could eventually raise programming costs for all the networks.

Individual interest : Mark Graboff wanted to make an impressive start and increase his reputation in the industry.

2. Paramount

Party interests:

(1) To maximize profits…