ARTEMIS IMAGES
Analysis of Nazarenus’ Initial Financial Projections
Initial financial projections performed by Mr. Christine Nazarenus lacks in different areas of revenue and sales volume forecast. Artemis Images’ revenue consists of four types of streams, however, analysis of projection for sales volume in exhibit 2 of the case reveals that sales volume of consumer photo is based on number of images sold and the estimated number of images during the year 2001 is 15,000 images per archive. Moreover, the estimated growth in number of images sold during the year 2002 and 2003 is 17% and 14% respectively, which is quite below in comparison to the previous trend of growth in sales of Indianapolis Motor Speedway Corporation (IMSC) archives during the year 1998 to 1999 that was 33%.
Moreover, the sales price selected for the customer photo is set at $19.99 per image; however, the sales price per customer photo has to be in between $20 to $150 per image, hence, sales price used in the financial projection is only 23.29% of the average estimated price, which is quite below the average. Despite the fact that Artemis Images has a competitive advantage over its competitors through its quality of digital contents but still the company is not only charging lower price but it has also estimated its sales volume to be lower than its competitors, consequently, this undermines its profitability.
Meanwhile, sales volume of stock photos is estimated to be 0.30% and 0.16% of archive in 2001 and 2002 respectively, whereas, the two market leaders are able to sell 2.35% and 0.60% of their archives. Therefore, the estimate is quite below the market leader’s rate which is not a reasonable estimate. Meanwhile, the calculations performed in Exhibit 2 of the case study uses 0.14% instead of 0.30% of its 2001 archive for sales volume of stock photos.
Moreover, financial forecast is based on $0.20 of margins per stock photo during the year 2001, whereas, the market leaders are generating $6.00 and $1.85, which are very higher than the margins of Artemis. However apart from the mistakes in forecast, reasonable estimates as percentage of archive for stock photo sale should be used in order to reach a reasonable financial forecast.
Moreover, syndication revenues are based on number of licensing deals secured the annual fee of $100,000 and this annual fee has been divided proportionately over the 12 months period of license. Nonetheless, analysis of Exhibit 2 and 3 reveals that annual licensing fee has calculated inappropriately, hence, it has reduced the annual fee revenue for the year 2002 and 2003; so, a revised calculation has been performed in Appendix-B.
Furthermore, merchandising revenue estimates have been based on the number of visitors in person at Indianapolis Motor Speedway Corporation (IMSC) during the year 1999 and Nazarenus as well as George have assumed that their 2001 merchandising revenues would be 42% more than IMSC’s sales of 1999. However, the total number of visitors at IMSC was $1 million during the year 1999; therefore, the expected number of online visitors for Artemis Images would be 42% more, i.e. $1.42 million.
Moreover, 1 percent of these visitors will do shopping, which will generate number of purchasing during the year 2001 equal to 14,200 and average purchasing amount has been estimated to be $50; which is below the lower market estimated purchasing. However, $50 purchasing is reasonable because no substantial amount of advertisement expenses has been incurred in order to attract people for buying at Artemis Images’ website. Moreover, the calculations performed in Exhibit 2 and 3 have used $7.5 of purchasing, which are incorrect and revised calculations have been performed in Appendix A. Additionally, Artemis Images’ business partners for whom the company has managed their content in exchange of rights over their content will give a link on their website to Artemis Images website in order to drive the consumers for purchasing their contents, meanwhile, consumer will also order for merchandising, which will increase the sales volume of merchandising, however, no such estimate have been incorporated in financial forecast, which ultimately undermine the reasonableness of the financial forecast.
Additionally, the forecasted number of unique visitors are based on the number of physical visits at IMSC during the year 1999, however, Artemis Images can access the world wide consumers through its website and access to the world will increase the sales volume for online merchandising sales but this will be against the financial forecast that has been prepared on the basis of physical visitor at a local event with addition to number of visit by 42%.
Artemis Images will a build community for customers and will offer customers with different facilities in order to attract them to use its website as well as introduce it to their friends; which may be a potential consumer for Artemis Images in future. All this will give it a differentiating position in the market of content management; however, Artemis has not incorporated any additional sales in respect of these differentiating facilities, which makes the financial forecast inappropriate.
Moreover, Artemis Images ...............................
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