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McKinsey Hard Investment Decision

PyeongChang Winter Olympics

#Tech, Media & Entertainment
ProHub Comment

This is a sophisticated NPV case requiring candidates to build a profitability framework grounded primarily in advertising revenue analysis. The case tests whether candidates can properly structure complex calculations, identify and account for opportunity costs, and apply discounting methodology—ultimately arriving at $177M through systematic elimination of non-core revenues and proper time-value-of-money adjustments.

Estimated Time 15 minutes
Difficulty Hard
Source Chicago Booth
50 / 100

In the year 2012, we have been retained by a television network that is trying to decide how much to bid for the rights to broadcast the 2018 Winter Olympic Games in PyeongChang, South Korea.

How much should they bid?

Clarifying Information

  1. Our client is a broadcast television network that makes money through advertising only, not subscriptions.
  2. Market research has shown that consumers can take no more than 10 minutes of ads per hour of television; they will stop watching if ad time is higher.
  3. Winter Olympics Schedule: Duration 16 days; Opening Ceremony on first day (Friday); Competitions held in next 14 days; Closing Ceremony on last day (Saturday).
  4. Broadcast times: Opening Ceremony 8-11pm; Weekdays coverage 9am-12pm, 2-5pm, 7-11pm per day; Weekend coverage 11am-9pm per day; Closing Ceremony 8-11pm.
  5. Advertising: Prime Time is Mon to Fri 7-11pm and Sat-Sun all day plus Opening and Closing ceremonies; Non Prime Time is Mon to Fri all other times; Ad slot duration is 30 seconds; Prime Time ad slot cost is $400,000; Non Prime Time ad slot cost is $200,000.
  6. Total ad revenue generated from the Olympic event is $928M, calculated as: Weekday non-prime $240M + Weekday prime $320M + Weekend prime $320M + Opening/Closing $48M.