Bidding Craze

Barry Diller is one of the most famous personalities in American media. The Time magazine called him the Miracle Mogul because he had phenomenal achievements in various media companies such as Paramount Pictures and Fox Television. In addition to this, he also mentored a significant number of executives who later became successful businessmen themselves, and as the media dubbed, they were collectively known as the “Killer Dillers”.

However, Barry Diller is also the protagonist of one of biggest blunders in the American television history. When he was vice president for prime-time programming at the American Broadcasting Company, he agreed to pay $3.3 million for a single showing of The Poseidon Adventure, the highest price ever any one-time film showing. It was so excessive that ABC figured to lose $1 million on the Poseidon showing. (Cialdini, 2006)

As someone from another network declared at the time, “There’s no way they can get their money back, no way at all.” So, how could a shrewd businessman like Diller manage to get a deal that would surely expect to lose a million? 

The reason might have something to do with the format of getting the deal. It was the first time in American history that a producer auctioned a motion picture to some television networks. In other works, the three major commercial networks had never been forced to battle for a single film like this before. Diller’s bidding rival, Robert Wood of CBS, recounted how this led to the mogul’s blunder. 

Wood said that he was very rational at first. His team evaluated the film regarding what it could bring in and allowed for a particular premium on top of that, but no higher price would be acceptable. Then the bidding started. ABC opened with 2 million. He came back with 2.4m. ABC went to 2.8m. And the fever of the thing caught them. Wood suddenly lost his mind and kept bidding, and finally went to 3.2m. Once he made the offer, it immediately struck him that he was silly, “Good grief, if I get it, what the heck am I going to do with it?” So that when ABC finally topped him with $3.3m, Wood felt neither beaten nor humbled. He was relieved, as a matter of fact.

Diller was economical about his comments after the event. Nevertheless, he later declared with an unpleasant mood, “ABC has decided regarding its policy for the future that it would never again enter into an auction situation.” 

It is instructive to note that it was the loser who had the last laugh in the competition, but it is even more enlightening to discover that even experienced executives can fall for the simple trick of scarcity. A child often experiences a surging desire to play with a toy when he finds another boy tries to take it away from him, even though he may not want to play with it before. The same goes for adults: when something becomes less available, we suddenly want more of it for no reason. As Robert Wood commented later, “You get caught up in the mania of the thing, the acceleration of it. Logics go right out the window.”

REFERENCE: Cialdini, R. B. (2006, Rev. Ed.). Influence: The Psychology of Persuasion. New York, NY: HarperCollins.