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PwC LLP
Professional Working Colleagues
Slide 1
LMC MediaEngagementBell Games, LLC Analysis
www.pwc.com
PwC LLP
Engagement Team
Blaire Budetti
Junior Consultant
Antoinette Patterson
Sophomore Consultant
Hannah Larkin
Senior Consultant
Cydnie Wright
Sophomore Consultant
Douglas Secrest
Senior Consultant
PwC LLP
Agenda
•Discuss Opportunity and Risk of: • Hands-off
• Selling
• Increase Investment
•Recommendations
PwC LLP
Analysis & Assumptions
Ignore $20M sunk cost• Cost has no effect on future decision
Assumptions• Acquisition price greater than opportunity cost
• LMC bears $30M contract buyout
• Cost Function
- (Future Investment) + (Contract Buyout)
• Projected $80M invested evenly over 3 years
PwC LLP
Research
• Research based on:• Industry metrics published by:
• 3 Gaming Technology Releases:
*All rights reserved for each respective trademark.
PwC LLP
“Hands-Off” Approach
Opportunities = large, fast growing market
Gaming Industry Revenue
$24.75Billion
PwC LLP
“Hands-Off” Approach
Risk• Violent games under scrutiny
• Ultimate Champion – Violent battlefield game
• Reputation risk from potential negative publicity
“Together, we plan to continue to offer our
customers the clean, wholesome fun that they have come to expect from each of our companies.” - Robin Oltman, CEO
PwC LLP
“Hands-Off” Approach
• Time frame for re-evaluating based on projected milestones and cost function
Q3'13 Q1'14 Q3'14 Q1'15 Q3'15* Q1'16 Q3'1650
60
70
80
90
100
110
Cumulative Cost (millions)
PrototypeComplete
Assess Testing
Contract Expires
PwC LLP
Selling
Advantages• Eliminates reputation risk
• Reduce risk of large net loss
Disadvantage• Loss of potential earnings
• Loss of potential marketing opportunity- Product placement & character tie-ins
PwC LLP
If Selling
Package as:• Innovated technology with current 6th best selling
game content
• Appeal to Battlefield 3 type company- They have current customer base
- Matches their current products and strategies
PwC LLP
HotBat Offer
Advantage• Remove reputation risk
• Invest the $ 50M in lower risk options
Required release -18 months- highly unlikely • Will have to crash development schedule
- Increase investment substantially
• To receive 10% of revenues
• Versus not selling and receiving 100% of revenues
PwC LLP
Increase Investment
Increase by 10 million for 1st year
• Produce standard family-friendly computer game
• Revenues off-set investment
• Allows further marketing strategy- Product placement & character tie-ins
PwC LLP
Increase Investment
If successful, continue 10 million per year
Consider changing game• Replace Ultimate Champion with family-friendly
game to align with values
• 7 of top 10 games are targeted to teenagers
PwC LLP
Increase Investment & Restructure
Greater opportunity & lower risk • Enhance cash flows
• Better fit values
• Further promotional strategy
• Less likelihood of net loss
• Diversify risk in gaming market- Produce standard computer game and new technology
PwC LLP
Key Points
• Gaming industry
• Reputation risk• Strong scrutiny of violent games
• Outside of LMC’s values
• Rapid changes in technology• Other company produce same or similar
technology
$24.75Billion
PwC LLP
Recommendation
• Increase investment & restructure
- Produce standard game
◦ Enhance cash flows
◦ Diversify in gaming market
- Change Ultimate Champion
◦ Mitigate reputation risk
◦ Better align with LMC’s values
PwC LLP
PwC is here to assist
No matter your decision,
PwC is here to help.
Creating value for our clients, people and
communities in a changing world.
Questions?