MC Hammer and the Art of Negotiation

Clearly I have an avid fascination with weird celebrity business stories. One of my all time favorites is MC Hammer. This one is a quick read too…

MC Hammer is actually known best for his series of poor business decisions (example basically blowing all of his money keeping an large entourage 200+, and a touring staff of something like 50 dancers… the entertainment industry equivalent of magic beans), but at one point he had sold over 50 million records worldwide and was making up to $35 million a year. Credit where credit is due, Hammer was legitimately good at making money (alas, not saving it).

To me though the most interesting part of MC Hammer’s story was way in the beginning, long before his $15 million dollar house with a swimming pool built in the shape of trousers. Hammer got his start by convincing dance clubs to let him and his dancers perform songs from his records live in the club. Meaning they would go to a club, throw a song on and dance to it. The spectacle was such a big deal that everyone in the clubs would clammer to buy his records that day. He was literally selling records out of the trunk of his car. MC Hammer was selling a lot of them too…

Hammer knew that if  he wanted to scale his business up though he would need to have access to a larger distribution channel. It’s important to note that the music industry at that point hadn’t yet been completely destroyed by technology (napster, itunes, bit torrents, etc) and they were pretty agile.  It wasn’t too long before the music companies had heard about MC Hammer and sent reps to go try and make a deal. Standard practice at this point was to find the talent before anyone else did and have them sign off on contracts that were not in their favor. Basically, take advantage of naive artists before they knew any better and cash in on their success. The record labels were the ones that were going to make you famous though- for many people trading all their cash to be famous was worth it.

MC Hammer knew all of this. So when the first major labels came in to try and make a deal, he was prepared. They of course made a low offer thinking that they would clean up. Hammer refused the offer. The record labels were stunned… they had offered good money to sign Hammer  and he said it wasn’t enough. [ Just for some scope… pretend someone came to you and offered you $750,000 (today’s dollars) for a 3 record deal… Most everyone would jump on that deal]

What the record labels failed to realize was that MC Hammer was selling a ridiculous amount of records out of the trunk of his car (estimated around 60,000).  Basically he had already worked himself out of being a new artist to being a nice little cash cow, and the record labels were effectively insulting him with a really low offer. Capitol records later came back to the table with $1.5 million as an advance and a multi-record deal.

I basically use the MC Hammer negotiation method for almost all of my negotiations (I don’t call it that):

  1. Be Prepared. Be so prepared that you know more about what the negotiation will look like than anyone else participating in it.

  2. If possible make them come to you.

  3. Use hard data. Hammer’s decision was entirely based off of his sales numbers. His negotiation reflected what he was really after was a larger market and to scale his business up… he didn’t need the money. Conversely the record companies were so used to using cash as their best negotiation tool they were caught off guard when Hammer’s negotiation didn’t reflect their normal procedures.

  4. Be able to walk away from any deal.

  5. Remember that terms are a huge part of any negotiation.

  6. Don’t be afraid to ask for over the top things.

  7. Negotiate to get what you want

  8. If you find someone that can sell 60,000 records out of the back of their car. Hire that person

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