ICE in Sports Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Analysis:

IEC has combined the sports and television business by utilizing the commercial values which are connected with televised events. In recent years, the value of commercial events related to football has increased due the demand from the developing countries in Africa and Asia. The first major success of IEC was also due to the delivery of Asian sports taking place in Europe. The company has since grown internationally and it has also developed a global capacity of production of sports programming and sales to media platforms.

iec in sports case solution

The business related to the broadcast rights within the sports marketing world is risky due to the cost of acquisitions to the federations, promoters, leagues and other holder of right up front. IEC takes the decision of acquiring the rights based on the knowledge of the market, past deals, projections and in some cases, speculation on the potential of respective rights.

The current decision, which IEC needs to take, is about the Portuguese football league rights. The rights of Portuguese league have been financially positive for IEC in the past.However, due to the increase in the acquisition fees and decrease in the sales of right, this has reduced the profits in the recent years and IEC is deciding whether to buy the rights or not for the upcoming season of the league 2011/2012.ICE in Sports Case Solution

IEC has confirmed sales of 8 million Euros and it is waiting for the reply of 11 clients on their decision to renew the contract with IEC for the new season. The cost of acquisition is expected to increase from 5% to 15%for 9 million euros, which were paid in the previous season by IEC. The increase of 5% will take the acquisition cost to 9.45 million euros and the increase of cost up to 15% will increase the cost from previous year to this year to 10.35 million.

The predicted data of IEC for the next season shows the potential of earning a decent profit and they might suffer a modest loss.

Best Case:

The predicted data by the management of IEC shows the revenue which will be generated by the 11 clients and probability of its happening. There is backup for some of the clients in case the first client refuses to renew the contract. According to the data given of the all clients, in the best case the revenue from all the remaining clients will be 2.54 million and the total revenue will be 10.54 million, while the cost of the acquisition, if increases by 5%, will be 9.45 million and the profit for the year will be 1.09 million. (Exhibit 1)

Best Case Scenario
Broadcast Clients	Renewal Probability	Renewal Potential Fees	Back Up Probability	Potential Fees	Outcome
A	0.9	750000	0.4	600000	675000
B	0.5	720000	0.7	450000	360000
C	0.8	525000			420000
D	0.4	480000			192000
E	0.3	450000			135000
F	0.75	375000			281250
G	0.6	300000	0.8	150000	180000
H	0.95	150000	0.9	100000	142500
I	0.6	150000			90000
J	0.25	90000			22500
K	0	0	0.6	80000	48000
Revenue from BC					2546250
Pre Sales					8000000
Total Revenue					10546250
Acquisition Cost					9450000
Profit					1096250

Worst Case Scenario:

The forecasted probabilities and revenues are often inflated by the managers due to the optimism, which shows the results which are best for the company rather than showing the real picture. However, with the changes being incorporated in the forecasted information like reducing the probability by 0.2% for all the possible revenues from the clients and the potential fees provided by the clients will be lower up to 10%. According to Somchai, the forecasts of probabilities are more prone to the errors than the forecasts of revenues. Under the worst case scenario, the revenue from the remaining 11 clients will be 1.2 million and the acquisition fees will be higher up to 15% than last year to 10.35 million. The total revenue of the worst scenario will be 9.20 million due to which IEC will face a loss of 1.14 million under the worst circumstances. (Exhibit 2)ICE in Sports Case Solution

To manage the risk, there are approaches which are undertaken by the organization to define a strategy and run their operations by taking the right decisions. The costs which have the ability to affect the financials and turning the venture into a loss making venture are then tackled by the management effectively............................

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