Case 25

Winter Olympics Bidding

Concepts tested Primary sector(s) Similar cases

• Z02 Net Present Value (2) • X05 Entertainment & Media • World View
(Harvard 2015)
• Z12 Creativity (3)
• Mobilizing Your World
(Fuqua 2015)

Case type • Footloose (LBS

2012)
• Y06 Opportunity assessment

Case author(s): Chris Dupre (Kellogg 2003)

Edited By: Uri Kalir (Kellogg 2012), Rohan Maini (Kellogg 2020)

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Winter Olympics Bidding
Interviewer guide
Case prompt
• 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.

Interviewer guide
• This is a very quantitative case that requires the interviewee to run the numbers on an Olympics bid. The candidate will have to
decide potential ad revenue/cost information, as well as the NPV, to determine bid size.
• The candidate will need to ask for additional information to solve the problem, rather than relying on the interviewer to dispense it.
After getting the initial calculations right, there are a lot of implications that may change the level of the bid.
• Especially for less finance-minded interviewees, you may have to help nudge candidates through the math.
1. Develop a structure to address the problem
2. Calculate NPV
3. Brainstorm intangible benefits and risks
4. Provide client recommendation

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Winter Olympics Bidding
Fit: Why do you want to join our consultancy in particular?

Case prompt
• 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
• No subscription revenue, but can keep 100% of advertising revenue
• Ad rates are $400k per 30 second ad for prime time (weekends, weekdays 1900 - 2300) and $200k non-prime time
• Market research has shown that you can include no more than 10 minutes of advertising per hour.
Costs
• $482m of total production costs
• Opportunity cost: $1m/hour
• Time value of money: 4 year lag for receipt of revenue

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Winter Olympics Bidding
Exhibit A – Winter Olympics Schedule

Day 1 Day 2 – 15 Day 16

Opening Ceremony Main events Closing Ceremony

Friday Weekday Weekend Saturday

0800 – 0900
0900 – 1000 Biathlon
1000 – 1100 Bobsleigh
1100 – 1200 Skating / Skiing Biathlon
1200 – 1300 Skiing
1300 – 1400 Skating
1400 – 1500 Curling Bobsleigh
1500 – 1600 Ice Hockey Skating
1600 – 1700 Luge Skiing
1700 – 1800 Ice Hockey
1800 – 1900 Skiing
1900 – 2000 Skating Luge
2000 – 2100 Opening commentary Luge Skiing Closing commentary
2100 – 2200 Opening ceremony Skiing Closing speeches
2200 – 2300 Opening speeches Luge Closing ceremony

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Winter Olympics Bidding
Part 1
1. Develop a structure to address the problem

Provide Exhibit A if the interviewee asks for TV schedules or identifies ad revenues in their structure

• Candidate should determine that this is a cost-benefit / NPV analysis.

• Candidate should identify potential revenue streams from hosting the Olympics, i.e. ad revenue, product placements, etc.
• Then, the candidate will have to figure out if this is a good investment. They should identify 3 costs (production costs, opportunity
costs, and time value of money). By factoring in these costs, the candidate will find out if the Olympics are worth the investment.
• Some of the numbers and assumptions here are difficult, so nudge the candidate along if necessary.

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Winter Olympics Bidding
Part 2
2. Calculate NPV

Revenues Costs
• $400k/ad for prime time (M-F 7-11 PM, all • $482M of production costs
weekend) and $200k/ad for non-prime time • Opportunity: $1m/hr
• 10 minutes/hour of advertisements • WACC: 10%

• Total revenues should be equal to $928M for the project.

• Primetime: Weekdays (M-F): 10 weekdays x 4 hrs/day x 10 min/hr x 2 slots/min x $400,000/ad = $320M
• Non-prime: Weekdays (M-F): 10 weekdays x 6 hrs/day x 10 min/hr x 2 slots/min x $200K/ad = $240M
• Weekend: 4 days x 10 hrs/day x 10 min/hr x 2 slots/min x 400K/ad = $320M
• Opening/Closing: 2 days x 3 hrs/day x 10 min/hr x 2 slots/min x 400K/ad=$48M
• Total profit should be equal to $300M.
• Profit: Revenues $928m - $482m of total costs - $146m of opportunity cost (2 days x 3 hours x $1m/hr + 14 days x 10 hours
x $1m/hr) = $300m
• NPV should be equal to $200m.
• Discount rate: 1.104 = 1.4641 (ask candidate to round to 1.50)
• $300m/1.5 = $200m

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Winter Olympics Bidding
Part 3
3. Brainstorm intangible benefits and risks
• Might give network access to new viewers
• There is prestige associated with hosting this event
• We can use the air time to promote other programming
• Opportunities for product tie-ins, supplemental revenue
• After finishing the discussion, ask the candidate for a recommendation

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Winter Olympics Bidding
Part 4
4. Provide client recommendation
• While the NPV of the project is $200m, the fact that there are other intangibles (new viewers, plugging our programs, and prestige)
the bid should just be $200m.
• While there is no one correct answer, most answers should be in the range of $200m. If there is significant fluctuation from $200m,
the candidate will have to provide in-depth justifications and make a concrete argument.

• This case tests the interviewee’s comfort with numbers and understanding of how intangible factors may influence financial value.
The bid process requires another level of understanding around game theory and what dynamics will ultimately determine the value
of the bid beyond NPV.
• Ultimately, the best interviewees will make a very strong argument using the facts provided and support their bid and explain why
they moved their bid from the NPV figure.
• There is also a lot of room for creativity for the interviewee to discuss other factors, including supplemental streams of revenue,
intangible factors, and things to consider during the bid process.

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