Estimate the revenue from broadcasting a major event?

marketsizing
New answer on Feb 05, 2020
5 Answers
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Anonymous A asked on Feb 04, 2020

How would you approach such question? For example, for World Championships / Olympic games.. I guess it's easy to estimate the number of people watching it on TV, but then we need the price per view and it is hard to estimate.

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Luca
Expert
Content Creator
replied on Feb 05, 2020
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello,

In order to have an estimation of the price per view you could use any data/estimation that you know. For example if you have an idea of how much does it cost a spot of 30 seconds on national TV or on how much were paid the football teams for the TV broadcasting, you can start from those data and do an educated proportion. Even from social media ads, if you have any clue.

Anyway that's not the most important part of the case, most of the times the interviewer will ask you for any idea to aproach the problem and then will give you a number to be used.

Best,
Luca

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Clara
Expert
Content Creator
replied on Feb 05, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

For all this market sizing brain teasers that estimate revenues, try to think it as P x Q:

  • P (price): revenue obtained for each viewer (in this case, might be easier to say per every 1000 viewers).
  • Q (quantity): estimation of the total population for the case:
    • 1st, take into consideration that here you calculate per TV that is watching, hence, per household (not per person)
    • 2nd, you can do an estimation of the % of households watching the Olympics, Super Bowl finals, etc.
    • 3rd, you can add on top a mark-up for bars and collective viewing.

This general approach can be always used in these cases.

Hope it helps!

Cheers,

Clara

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Vlad
Expert
Content Creator
replied on Feb 04, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

To simplify it, I would

  1. Calculate the number of viewers (as a % of population of different age)
  2. Apply the av CPM price from online as a proxy (Let's say the average online is 50$ per 1000 views, then on TV, during the major sports event it will be 100-150$ for the US).
  3. For the Developing countries, you should apply much lower CPMs

Best

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Sidi
Expert
replied on Feb 04, 2020
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi! At the highest level you have two value levers:

I. Airtime value (=Revenue from selling advertising slots during the programme)

II. Subscription value (=Revenue from getting new pay-TV subsciptions (or avoiding churn) due to the sports event)

So in order to quantify these, on the highest level you need to (I) estimate the length of advertising clips that can be broadcasted and the revenue per minute, and (II) estimate the number of people subscribing, number of people not churning, and the subscription fee per supscription cycle

Hope this helps.

Cheers, Sidi

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LL
Proficient
replied on Feb 04, 2020
Currently working at MBB. Benefited a lot from this platform so would like to give back now by answering interview Qs.

Hi,

Don't know which firm you're interviewing with but I would suggest the following:

1). Figure out the potential revenue streams for the program, let's say it's for the Olympic, I would say major revenue streams are tickets sales, advertisement, entry fees from each partipating country(?), interviewers may ask what else here, so make sure you're creative, you can even further struture it by categorising them as direct and indirect revenue streams

2). after you have a clear list of revenue streams, you can estimate the revenue for each stream, for some it maybe market sizing, like ticket sales, then you usa the market sizing approaching (1). demand/supply 2). formula 3). assumption 4) calculation 5) sanity check) Due to time conern, very likely you don't need to calculate for every revenue stream, interviewer will pick one for you

3). Then you add up everything and maybe make some adjustment base on your judgement of the reality

Hope it helps!

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Anonymous A on Feb 04, 2020

Hi! Thanks. If we are calculating revenue from the event it works. But what I meant is revenue from TV broadcasting.