Some years ago, Time Warner (TW) and Disney were engaged in lengthy negotiations to strike a deal so that TW's cable television service would continue to carry Disney programming and Disney's ABC network channels. Without an agreement, TW would lose ABC and Disney shows in 3.5 million homes across seven major markets. Disney was demanding as much as $300 million from TW for the right to carry the channels. It also wanted TW to feature its new channels (including Toon Disney) and for TW to make the Disney channel part of its basic cable package. If its demands were not met, Disney threatened to pull its programming immediately, during the crucial ratings sweeps period when audience levels are measured and future advertising rates are set. Losing ABC and Disney would anger TW's cable customers who might decide to switch to rival satellite television to get the channels. TW wanted the current agreement extended for six months, by which time the AOL Time Warner merger would be completed (securing the company's position as a multimedia giant).
(a) Describe the relevant factors that would influence the "balance of power" in the negotiation between Disney and TW. Is each side's negotiation strategy utilizing what power it has? Explain briefly.
(b) Imagine that the negotiations were to end in failure. Provide at least two reasons (in general) why this kind of outcome could occur.
(c) Disney is worried that in the near future when interactive television is a reality, TW could hinder Disney and others from offering interactive programming over its cable lines while favoring its (TW’s) own programming. Disney is pressing TW to commit to treat others’ channels and programming the same as their own. TW says Disney’s demand is too broad for discussion and that it is impossible to negotiate the terms of businesses that don’t
yet exist. What are the pros and cons of considering these issues in the current negotiations?

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The Answer of Some years ago, Time Warner (TW) and Disney were engaged in lengthy negotiations to strike a deal so that TW's cable television service would continue to carry Disney programming and Disney's ABC network channels. Without an agreement, TW would lose ABC and Disney shows in 3.5 million homes across seven major markets. Disney was demanding as much as $300 million from TW for the right to carry the channels. It also wanted TW to feature its new channels (including Toon Disney) and for TW to make the Disney channel part of its basic cable package. If its demands were not met, Disney threatened to pull its programming immediately, during the crucial ratings sweeps period when audience levels are measured and future advertising rates are set. Losing ABC and Disney would anger TW's cable customers who might decide to switch to rival satellite television to get the channels. TW wanted the current agreement extended for six months, by which time the AOL Time Warner merger would be completed (securing the company's position as a multimedia giant).
(a) Describe the relevant factors that would influence the "balance of power" in the negotiation between Disney and TW. Is each side's negotiation strategy utilizing what power it has? Explain briefly.
(b) Imagine that the negotiations were to end in failure. Provide at least two reasons (in general) why this kind of outcome could occur.
(c) Disney is worried that in the near future when interactive television is a reality, TW could hinder Disney and others from offering interactive programming over its cable lines while favoring its (TW’s) own programming. Disney is pressing TW to commit to treat others’ channels and programming the same as their own. TW says Disney’s demand is too broad for discussion and that it is impossible to negotiate the terms of businesses that don’t
yet exist. What are the pros and cons of considering these issues in the current negotiations?

Some Years Ago, Time Warner (TW) and Disney Were Engaged