CIMA Global Business Challenge Fantastic Four Moscow, June 8, 2012
Our mission: To provide people with high quality, informative and entertaining programmes Our vision: To be the best programme creator in England Our values: • High quality • Our audiences • Trust of our clients
“Banks – friend or foe? ”
Background: “Banks – friend or foe? ” – A new documentary from the VYP What? • Margin of £ 32, 000 = 11% commissioned revenue • LOSS of £ 30, 000 = 10, 3% commissioned revenue General info Top priority Why? Clear causes Why? Root cause • Large number of inconsistencies • Long investigation phase • Repeated interviews • Reduction of 14, 4% in average commissioned revenue per hour for documentaries Second priority Third priority Fourth priority Ethical issues Recommendations
Background: “Banks – friend or foe? ” – A new documentary from the VYP For Producer’s suggestions • Documentaries = reputation • Cutting back expensive CGI • Putting an end to the investigation phase General info Top priority • Losses don’t go along with VYP objectives Against Second priority Third priority + profitability • Potential award • Renewed interest for documentaries • Successful documentary = informative + entertaining • Estimated loss = mere 0, 1 % of total operating profit Fourth priority Ethical issues Recommendations
Cost effectiveness or quality?
Recommendations: “Banks – friend or foe? ” – A new documentary from the VYP Recommendations Actions to be taken Plan further expenses in detail and follow them closely Reject the proposal of cutting expenditures Increase revenues by means of expanding audiences through: Concentrate on seeking new sources of revenue • • Set more strict control on further expenditures General info Top priority Second priority Third priority Educational direction International sales Advertiser funded programmes Internet marketing Fourth priority Ethical issues Recommendations
Sammy the Squirrel
Background. Fee negotiation for children’s programme Variant 1: Variant 2: • £ 6, 3 million of revenue • £ 4, 095 million of revenue(-35%) • + 10% share of sales (20× 0. 9×£ 350, 000) • No IP rights General info Top priority (25%× 40%) Second priority Third priority Fourth priority Ethical issues Recommendations
IP rights or no IP rights?
Breakeven Analysis. Fee negotiation for children’s programme 7000 Е 6500 Total Revenue, £'000 • Guaranteed revenue £ 6, 3 mln (Variant 1) £ 4, 095 mln (Variant 2) • To break even £ 2, 205 mln of merch. revenue ≡ £ 22, 05 mln level of merch. sales needed 6000 5500 • Projected sales levels: Teletubbies (1997) = £ 23 mln Sammy the Squirrel (2012) = £ 23 mln × 138. 3% 5000 4500 • £ 31, 809 mln of merchandised sales 4000 0 General info 5000 10000 15000 20000 25000 30000 £ 975, 900 of EXTRA PROFIT! Merchandised Sales Level, £'000 Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Recommendations: Fee negotiation for children’s programme Risks • Underperforming • Regular media exposure • Piracy • Economic slowdown General info Top priority Short-term strategy Long-term strategy • maintain IP rights • select the right licensee • hire a merchandising manager • satisfy increasing demand in peak seasons • assess foreign markets (representative office in the USA) • protect your IP. Second priority Third priority Fourth priority Ethical issues Recommendations
Rowing championship
Background: Re-commissioned drama series Lower fee New contract on drama series Implementation time: April 1, 2013 Shooting time: 4 months • J. Strong (main No actor General info Top priority • Offered revenue: £ 5 million (-10%) • Maximum profit (by J. Black): 5 % Second priority Third priority character) unavailable: Contracted for 10 months from April 1, 2012 Fourth priority Ethical issues Recommendations
How often do we show?
Solution 1: Re-commissioned drama series Usually drama series is shown once a week Drama programmes: • Length=54/56 mins. • 300, 000<Cost<500, 000 (393, 000 last year) • 8 programmes • Cost=max= 500, 000 • Total costs=8× 500, 000= 4 million • Operating profit=Revenue – Total costs = 5 m – 4 m = £ 500, 000=10 % margin Thus, there are spare £ 500, 000 as a maximum to be paid for J. Strong £ 1 million General info Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Solution: Relax!
Solution 2: Re-commissioned drama series Why more money? IF our drama series is shown twice a week Profit≤ 4% (less than last year) Filming outside + computer graphics More money needed for John Strong Filming costs increase with time Now prominient actors and screenwriters General info Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Recomendations: Re-commissioned drama series • Find out how often the series should be shown • Negotiations with BBC about: - promoting Zubinos Coffee Shops in the advertising time in between of the drama series - getting more money if filming more than 8 hours is the case • Negotiations with GGG about obtaining J. Strong General info Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Zubinos Coffee Shops
Background Proposal to expand into corporate advertising video Problems • Negative profit margins in the short-term • Tough competition • No self resources • Penetration into a new market of corporate advertising Opportunities • Attracting more clients • Positive profit margins in the long-term Risks General info • Harm to VYP’s reputation in case of failure • Drop of profits due to costly entering the market Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Recommendation Proposal to expand into corporate advertising video • Lower costs • Margin 2, 9% • Inferior quality Short- Long- • Lower costs • Margin 17, 5% General info Short - term • Higher costs • Margin -8, 8% • High quality • High level of competition • VYP does not have own studio crew • Not worthwhile to enter the new market term Long-term • Retain profit to have own studio crew • Make advertising videos • Contract with BBC to show adverts in between of the drama series • Renegotiating the fee • Higher costs • Margin 7, 5% Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Ethical issues. Why should VYP choose to be ethical? New employees Reputation Long-term sustainability Success General info Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Ethical issues. Accident at studio Working anti-social hours Bad working conditions Top priority Investigation on the case conducted Worker with an arm broken General info Press-release ensuring the opposite issued Recovery fully paid for Second priority Third priority Fourth priority Ethical issues Recommendations
Ethical issues. “Banks – friend or foe? ” – the world has the right to know the truth Revealing the truth: CGI, schemes and more interviews Margins DOWN Budget cutting: No CGI and repeated interviews General info Top priority Second priority Third priority Margins UP Fourth priority Ethical issues Recommendations
Should profit reasons be put aside this time in order to keep company’s image on a high level?
Ethical issues. “Banks – friend or foe? ” – the world has the right to know the truth Yes, they should! Main priority – high quality Losses = 0, 1 % Main value: our audiences All the necessary figures and schemes should be shown General info Top priority Second priority Third priority Fourth priority Ethical issues Recommendations
Fantastic Four Anastasia Stupina Alexander Kopytkin Tamam Guseynova MGIMO, Moscow, Russia Daria Surzhik
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