Cricket Mania
By Participation Code - CB11
Sports
Investment Decision
Profitability
IESE CONSULTING CLUB
Easy
Medium
Hard
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Sports
Investment Decision
Profitability
Cricket Mania
PROMPT
CLARIFYING POINTS (if asked)
• Success here would be defined based on improved profitability
PCC is one of the cricket franchise in
worlds largest cricket league, LPI.
Despite having one of the strongest
teams in league, PCC has continuously
disappointed its fans and owners and
has failed to live up to its true potential.
Mr. Gandhi, has recently replaced Mr.
Modi as the new CEO of PCC. Mr.
Gandhi has been handed the task of
turning around the fortunes or PCC. Mr.
Gandhi has been an ardent cricket fan
and player of the sport all his life. He
also has a track record of turning around
corporates.
Mr. Gandhi has hired you to investigate
and recommend on the action plan.
IESE CONSULTING CLUB
Easy
Medium
Hard
• The team has been relatively stable with no abnormal changes
• The owners are willing to incur Capex to attract up to two star-performers in the auction
• PCC lacks brand recall, amongst the lowest in the league
• All franchisees in the league are profit making
• The overall cricket viewership and popularity has been on the rise (assume pre-covid time)
CASE GUIDANCE
In this case the candidate should not rely on any pre-knowledge of the game and think of the
problem as a classical profitability issue.
The candidate should ask the right questions and aim to grow the existing revenue streams
and add new revenue streams to improve profitability. The interviewer should guide the
candidate towards focusing on improving revenues and not get stuck on reducing costs.
Given, that a franchisee’s brand has a high impact on revenues, the candidate should be
conscious of making recommendations to improve the brand as well.
For Interviewer’s understanding ONLY (to understand the business model):
•
Key revenue streams - Broadcasting Rights, Sponsorship, Ticket Sales, Merchandize Sale,
Player trading
•
Major Costs heads – Player Fee (30-35%), Franchise Fee (20%)
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Sports
Investment Decision
Profitability
Cricket Mania
SAMPLE STRUCTURE
INTERVIEWER GUIDANCE
Increase Ticket
Sales
Improve Existing
Revenue
Increase NonTicket Income
Increase Revenue
Add New
Revenue Streams
Improve Profit
Reduce Player
Fee
Staff and
Corporate
Expenses
Other
Operational
Expenses
IESE CONSULTING CLUB
Add ancillary
businesses
Improve success
linked fee
Reduce Costs
Easy
Medium
Hard
Trade/Fire nonperforming
expensive players
The interviewer should allow the Candidate
to share different ideas but eventually guide
the Candidate to focus on improving the
Revenues
The next exercises, focuses on increasing
existing revenues streams by improving team
performance and brand-rating, thereby
charging more for tickets, merchandize, etc.
The Interviewer should try to guide the
Candidate towards identifying that both
these objectives can be achieved through
acquiring Star players.
Once the Candidate takes that path, the
interviewer should share Exhibit-1 & Exhibit-2
with the candidate and let them make the
choice
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Sports
Investment Decision
Profitability
Exhibit-1 (INTERVIEWER VERSION)
LPI TEAM RANKINGS FOR THE LAST 3 YEARS
Easy
Medium
Hard
AVERAGE STAR RATING SCORE
League Rankings
Average Star-Rating
CSC
DDC
HYC
KKC
MMC
2020
2019
CSC
DDC
HYC
KKC
2018
MMC
PCC
RBC
RJC
PCC
RBC
RJC
INTERVIEWER GUIDANCE
The Candidate should be able to identify that while the performance for most team typically varies, PCC has consistently performed poor. A great
candidate would even calculate average ranking over the 3 years and see PCC as the lowest average ranking.
At this point, Interviewer should ask the Candidate that could be the potential reason for this and then guide the candidate towards looking to
acquire new Start Players, to improve the team “Star-Rating”. Once the Candidate has gotten there, the Interviewer should show Exhibit-2
Note: Rankings and reflect the team’s performance i.e., highest bar indicates the winning team and the lowest reflects the last finishing team
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Sports
Investment Decision
Profitability
Exhibit-1 (CANDIDATE VERSION)
LPI TEAM RANKINGS FOR THE LAST 3 YEARS
Easy
Medium
Hard
AVERAGE STAR RATING SCORE
League Rankings
Average Star-Rating
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
CSC
DDC
HYC
KKC
MMC
PCC
RBC
2020
2019
CSC
DDC
HYC
KKC
2018
MMC
PCC
RBC
RJC
RJC
Note: Rankings and reflect the team’s performance i.e., highest bar indicates the winning team and the lowest reflects the last finishing team
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Sports
Investment Decision
Profitability
Exhibits-2 (INTERVIEWER VERSION)
Star batsmen available for auction
Easy
Medium
Hard
Star bowlers available for auction
Signing Fee
(USD Mn)
Games
Played
Wickets
Taken
LM
7.0
125
200
1.6
7
9
YC
5.5
100
121
1.2
6
30
8
JB
8.0
75
140
1.9
9
5250
35
7
AM
5.5
150
175
1.2
6
5200
40
9
DS
10.0
70
97
1.4
8
Signing Fee
(USD Mn)
Games
Played
Runs Scored
Avg. Score / Start Rating
Game
(out of 10)
VK
15.0
200
6000
30
10
MD
15.0
200
4800
24
RS
12.0
200
6000
DW
10.5
150
CG
12.0
130
Avg. Wicket / Start Rating
Match
(out of 10)
Note: Maximum permitted budget for acquisitions is $20mn
INTERVIEWER GUIDANCE
The Interviewer should explain that a Batsmen’s success is linked to scoring more, whereas the Bowlers success is linked to maximum wickets – a great Candidate would suggest
and analyse additional metrics such as bowling economy, strike-rate, run-rate etc to refine his model. (although not necessary for people who don’t understand the game)
The Interviewer should assess the Candidate’s decision making on the basis of his/her ability to derive some kind of mechanism to put the data into perspective and make an
objective decision. The ideal decision would be based on “highest average runs” and “highest average wickets” (which they do not have in their version). If the Candidate doesn’t
get to calculating average, the Interviewer should guide the Candidate to it.
The most ideal combination is “CG as the batsmen” and “JB as the bowler” – a) highest averages, b) together add up to the allowed budget and c) highest combined Star rating
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Sports
Investment Decision
Profitability
Exhibits-2 (CANDIDATE VERSION)
Star batsmen available for auction
Easy
Medium
Hard
Star bowlers available for auction
USD Mn
Games
Played
Wickets
Taken
Start Rating
(out of 10)
LM
7.0
125
200
7
9
YC
5.5
100
121
6
6000
8
JB
8.0
75
140
9
150
5250
7
AM
5.5
150
175
6
130
5200
9
DS
10.0
70
97
8
USD Mn
Games
Played
Runs Scored
Start Rating
(out of 10)
VK
15.0
200
6000
10
MD
15.0
200
4800
RS
12.0
200
DW
10.5
CG
12.0
Note: Maximum permitted budget for acquisitions is $20mn
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Cricket Mania
Sports
Investment Decision
Profitability
Easy
Medium
Hard
ACQUISITION DECISION
Would you spend money on acquiring the Star-Players?
INTERVIEWER GUIDE
At this stage Candidate can take the decision of acquiring the two star-players given that the budget allows them to spend $20mn. In
this case, the Interviewer has two options -:
a) Skip the Exhibit-3 and straight move to Brain-Storming exercise
b) Challenge the Candidate by trying to quantify the financial impact of the decision in terms of additional profitability
However, a great candidate would proactively ask if we have any data or predictive analysis of the likely impact of the acquisitions.
Given the aim is to improve profits, Candidate should try to assess the impact in terms of numbers and not just direction.
Interviewer should share Exhibit-3 if the Candidate asks for additional data to quantify the impact
IESE CONSULTING CLUB
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Sports
Investment Decision
Profitability
Exhibit-3
PCC PPREDICTED YEARLY LEAGUE RANKING (3 YEARS)
70%
Rank
40%
35%
30%
30%
20%
0%
Prize (USD Mn)
55%
50%
10%
LPI PRIZE MONEY DISTRIBUTION BASIS
65%
60%
Easy
Medium
Hard
10%
0%
Below-5
Top-5
With Acquisitons
Top-3
5%
0%
Below-5
0.0
Top-5
10.0
Top-3
20.0
Top-2
50.0
Top-2
Without Acquisitons
INTERVIEWER GUIDANCE
➢ Predicted Yearly Profit with acquisition (USD Mn) = 65%*10.0 + 30%*20.0 + 5%*50.0 = $15.0mn (for 3 years)
➢ Predicted Yearly Profit without acquisition (USD Mn) = 55%*0.0 + 35%*10.0 + 10%*20.0 = $5.5mn (for 3 years)
➢ Additional Profit of ~10Mn/year for next 3 years just from Prize money. The investment of $20mn will get covered in two years. A great candidate
would remember that the Star-Ranking of the team would also improve and thus lead to additional Revenues and hence even higher profits
IESE CONSULTING CLUB
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Sports
Investment Decision
Profitability
Cricket Mania
Easy
Medium
Hard
BRAIN STORMING EXERCISE – NEW REVENUE STREAMS
What are some of the additional revenues streams that PCC can look to add to their operations in order to support
the company turnaround and profitability?
SOME SAMPLE IDEAS
✓ Merchandizing revenue
✓ Start a junior training academy
✓ Launch a mobile gamming app
✓ Launch a sport magazine, sport website, online talk
show for ad-revenues
✓ Launch co-branded credit/debit cards for fans to make
commission income
✓ Create a paid fan club with special privileges like
✓ Ultra-Premium Membership for seats close to players,
priority access for tickets, lunch with players, etc.
allowing hotel access to fans, and similar incentives
✓ Partner with a co-branded cafes and sports bars
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Cricket Mania
Sports
Investment Decision
Profitability
Easy
Medium
Hard
FINAL RECOMMENDATION (SAMPLE RECOMMENDATION)
Acquire the two-star players, because:
•
The acquisition improves the probability of winning
•
The Probability adjusted winning prize money increases profits by ~$10mn/year for the next three years
•
The additional profits cover for the upfront investment of ~20mn
•
The other revenue streams can add a significant headroom to the profits, given the non-prize revenues (typically a major
chunk of income), will be directly related to the brand-value of the franchise and the star players. Which would improve a lot
given the better performance in the league and the presence of Star players
Risks:
•
Players come with high chances of injury, which means the winning probability may not be accurate
•
Team sports also depend a lot on the team dynamics, maybe the players are not able to perform well with the franchise
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