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McKinsey Hard Merger & Acquisition

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 36 minutes
Difficulty Hard
Source Chicago Booth
40 / 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.
Mock Interview
Interviewer

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?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

A TV network must determine its maximum bid for 2018 Winter Olympics broadcasting rights. The solution requires calculating total ad revenue ($928M), subtracting production costs ($428M), accounting for opportunity cost of displaced programming ($146M), and discounting future profits to 2012 dollars at 12% rate, yielding a recommended bid of $177M.

Key Insights:

  1. Revenue-focused profitability cases require disciplined drill-down into revenue sources before cost analysis—here, advertising revenue is the primary value driver for a broadcast network
  2. Opportunity cost is often the differentiator between adequate and excellent case performance; candidates must recognize what programming the network would forgo
  3. NPV and discounting are critical in investment decisions involving future cash flows; the rule of 72 simplification halves the 2018 profit when discounting 6 years at 12%
  4. Candidates should structure ad revenue by time slot category (prime vs. non-prime) and consider how consumer constraints (10 min ads/hour maximum) affect feasible inventory
  5. Competitive and strategic considerations (preventing competitor access, expanding viewership) can justify bids higher than pure NPV analysis suggests