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Hard Opportunity Assessment Net Present Value

Winter Olympics Bidding

#Entertainment & Media
ProHub Comment

This case tests quantitative rigor combined with strategic judgment. Candidates must calculate NPV precisely ($200M) but then determine whether intangible factors (viewer acquisition, brand prestige, cross-promotion opportunities) justify adjusting the bid upward or downward. The case rewards structured thinking, financial accuracy, and ultimately the ability to defend deviations from the NPV using game theory and competitive bidding dynamics.

Estimated Time 15 minutes
Difficulty Hard
Source Kellogg
50 / 100
Our client, a major US television network, is trying to figure out how much to bid for the exclusive right to broadcast the Winter Olympics Games in four years time. The Winter Olympics are a huge deal and will require a significant amount of capital to secure the rights, so our client has brought us in to help them figure out the right bid amount after considering all relevant factors.

Clarifying Information

Revenues:

  1. No subscription revenue, but can keep 100% of advertising revenue
  2. Ad rates are $400k per 30 second ad for prime time (weekends, weekdays 1900 - 2300) and $200k non-prime time
  3. Market research has shown that you can include no more than 10 minutes of advertising per hour

Costs:

  1. $482m of total production costs
  2. Opportunity cost: $1m/hour
  3. Time value of money: 4 year lag for receipt of revenue