The Hobbit - a Huge Strategic Win for NZ Inc.

The Hobbit Negotiations - a Huge Strategic Win for NZ Inc.
Opinion From Harry Mills

In 2005 Helen Clark flew to Dublin to support Jock Hobbs, Colin Meads and Tana Umaga to secure the hosting rights for the 2011 Rugby World Cup for New Zealand. This week, John Key clinched a deal with Warner Bros to keep the making of The Hobbit movies in New Zealand. In Dublin, Helen Clark was a support player. In New Zealand, John Key played master dealmaker.

So how should we rate Key’s deal making prowess? I spend much of my life negotiating deals for large companies and government agencies, and critiquing negotiation strategies. Most negotiation text books feature stories of smart and dumb deal makers. In The Hobbit negotiations, the prize for dumbness, no stupidity, goes to the New Zealand Actors’ Equity and their Australian parent.

For one moment I had visions of Peter Jackson and Richard Taylor leaving New Zealand, and Wellington becoming a Canberra.

The unions never understood the first rule of successful business and deal making: “Don’t play a game you can’t win!” The trouble was that this was a game where the likely losers were the thousands of actors and support staff, along with the New Zealand film industry.

Key’s handling of the negotiation from start to finish has been masterful. Key understood that the Warner Bros executives weren’t coming to New Zealand to negotiate with any low level monkeys. They wanted to strike a deal with New Zealand’s titular organ grinder: the PM.

The negotiation was never just about labour issues. The union plays which precipitated the crisis gave Warner Bros the ability to demand extra tax breaks. Key showed his trademark pragmatism when he agreed to change the labour laws. In practice this concession cost New Zealand very little. Claims that New Zealand sold its democratic soul for forty pieces of silver are nonsense.

Smart deals come when you trade what is cheap for you for what is valuable for the other side. Sure, we had to cough up tax breaks, but these were miniscule compared to the possible losses.

The master stroke was the creation of a strategic partnership between Warner Bros Studio and the government to promote New Zealand as a destination for film production and tourism.

You don’t have to be a marketing guru to appreciate what a promotional film on New Zealand that goes out with the tens of millions of The Hobbit DVDs will add to the long term value of Brand New Zealand. Multinational companies such as Apple and Coca-Cola would give their eye teeth to take advantage of the promotional opportunity that has been negotiated as part of the government’s deal with Warner Bros.

If we had lost The Hobbit movies, the halo that has attached itself to Brand New Zealand from The Lord of the Rings would have inevitably faded. The Hobbit movies allow us to refresh and reinforce New Zealand’s core brand values as a tourist destination. Have no doubt, The Hobbit movies will do more for Brand New Zealand than any possible victory in the 2011 Rugby World Cup.

Our previous PM earned a deserved reputation as a good negotiator. On this deal, John Key looks as though he deserves the accolade ‘great’. Our politicians too often have a reputation for talking big and getting small. We now have a PM who understands business negotiation, who can talk big for his country and achieve big.

Wellington businessman and author Harry Mills works on negotiation strategies for international clients such as Toyota, Rio Tinto and AMP.

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