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Richard

on Jul 17, 2021

Global

Question about

Choosing Writer I over Writer III

I am very confused as to why choosing writer I over Writer III would make any sense.

The breakeven from where on writer I will be cheaper than Writer III is at 1'500'000 books.
The TAM is only 1'000'000. Even when considering population growth it doesnt make sense.
There is 50% market missing and also that only works when 100% of the market is captured.

Long-term contract binding is not sufficient in my opinion to chose a writer 100k more expensive to hope to one day grow the market by 50% while simultaneously capturing 100% of it.

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Top answer

Ian

Coach

on Jul 17, 2021

Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi Richard,

That's a fair take. You could propose this in an interview and, if you can defend your reasoning that's perfectly fine!

i haven't look at the exact math of this case, but your logic is sound.

1 comment

Chris

on Jun 20, 2024

I'm wondering if there's not a more basic assumption at play here. The case explains "it has come to their attention that some private schools are considering changing their first-grade textbooks, for which they would need a publishing agency." Presumably the rewrite of the textbooks would be a once off process, rather than a recurring one? If so, we can assume that the contracted writer's base salary will fall away after a year or two, and the royalty payments into perpetuity become the only real cost factor. In that case Writer 1 is indeed the cheaper long-term option.