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Medium Profitability

Must The Show Go On?

#Entertainment
ProHub Comment

This case tests candidates' ability to balance quantitative profitability analysis with strategic decision-making under uncertainty. While the AgS show is marginally more profitable on an annual basis ($600k additional profit), the 4-year payback period on the $2.4M switching cost makes it economically unattractive, especially given the already substantial 79% profit margin from T&P. The case also evaluates whether candidates consider indirect knock-on effects (room occupancy, gambling, dining) beyond direct P&L.

Estimated Time 15 minutes
Difficulty Medium
Source Wharton
50 / 100
Our client is Brutus’, one of the largest gaming and resort companies in the world. Tenn and Peller have been the headlining show at the Janeiro Hotel since 2001, and they are currently the longest-running headlining show in Vegas history. Brutus’, who owns the Janeiro Hotel where the duo performs in the 1,500 seat T&P Theater, is wondering if their act has become stale. Tenn & Peller’s annual contract is about to expire, and before Brutus’ has a meeting with the duo, they have asked our firm’s advice on whether or not to re-sign them for another year.

Clarifying Information

  1. As one of the largest entertainment companies on the Strip and around the world, Brutus’ solely cares about the company’s bottom line profitability
  2. As is the Vegas standard, all contracts are for a one-year time period
  3. The show has plateaued with no change in bottom line profitability in the past five years
  4. Brutus’ biggest competitor is GMG Resorts, which also operates about 33% of the Strip
  5. T&P competes against a whole bevy of nighttime entertainment, such as other shows, nightclubs, and gaming