Management Consulting Case Study-Winter Olympic Bidding

Case Scenario - Our Client is a significant US television network, to assist us in determining the appropriate bid for the 2018 Winter Olympics. The Winter Olympics are a big business, and acquiring the rights will cost a lot of money. We want to be certain that we've taken all the appropriate factors into account before our network submits a bid for the Winter Olympics.

Quantitative approach- They should identify 3 costs (production costs, opportunity costs, and time value of money) By factoring in these costs, they will find out if the investment is worth it.

Qualitative approach- Might give network access to new viewers - There is prestige associated with hosting this event - We can the air time to promote another programming - Opportunities for product tie-ins, and supplemental revenue.

Question 1- Determine the Winter Olympics' broadcasting earnings.

Answer- Weekdays (M-F):. 10 weekdays x 4 hours/day x 10 min/hr x 2 slots/min x 400K/ad = $320M, weekends (W-D): 4 days x 10 hrs/day/weekend ($400,000/ad, $240M),

Question- Is this a wise investment, taking costs into account? Locate the NPV.

Answer- With a six-year lag and a 12% WACC, we know that all future cash flows must be halved. $928M - $428M of total costs - $146M of opportunity cost (2 days x 3  hours x $1M/hr) = $346M in present value (NPV).

Revenue- Advertisers spend $428,000,000 of their own money on advertising for prime time (M-F 7-11 PM,  all weekend) and  $200K/ad for non-prime time.

Recommended solutions-

The project has a $177M NPV, but because there are additional intangible benefits (new viewers, promotion of our programmes, and prestige), the proposal should only be $177M. Although there is no one right response, the majority of replies should fall between $200M and $300M. If there is a considerable departure from the $200M target, the applicant will need to give detailed reasoning and make a convincing case.

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By Vandana Gaur