Compare Two-Year Economics for Renewing or Replacing a Show

# Compare Two-Year Economics for Renewing or Replacing a Show A streaming business is considering renewing an existing show, The Analyst, or producing a new show, Shark Bank, for a two-year period. Use the following case inputs. Revenue per viewer and production costs recur annually; the new show's start-up cost is paid once. Treat audience size as constant within each stated scenario and ignore unlisted costs, discounting and taxes for the arithmetic, while identifying where those simplifications matter to a business decision. | Input | The Analyst | Shark Bank | | --- | --- | --- | | Annual audience | 5 million | 7 million on success; 4 million on failure | | Annual revenue per viewer | \$15 | \$15 | | Annual fixed production cost | \$50 million | \$60 million | | One-time start-up cost | None specified | \$20 million | The probability that Shark Bank succeeds is not supplied. Do not assume that its two outcomes are equally likely. ### Part 1 — Identify the decision factors What financial, audience and operational information would you consider before renewing a two-year contract? #### What This Part Should Cover - Production economics, subscriber retention, audience overlap and uncertainty in the new show's success. - A distinction between the simplified inputs and information still needed for the real decision. ### Part 2 — Calculate and compare profit Calculate two-year profit for The Analyst and for both Shark Bank scenarios. Express the new show's expected profit using its success probability, and explain when it would exceed the existing show's profit. #### What This Part Should Cover - Two years of recurring revenue and cost, with the start-up cost subtracted only once. - A probability-sensitive recommendation rather than an unsupported point estimate. ### Part 3 — Improve the existing show's profit If the business focuses on The Analyst, what levers could improve its profit and how would you evaluate them? #### What This Part Should Cover - Audience volume, revenue per viewer and production costs, including tradeoffs with retention and quality. - Measurement that distinguishes incremental revenue from shifting revenue between shows. ### What a Strong Answer Covers Use consistent units, distinguish expected profit from downside risk, and explain which missing inputs could change the decision. ### Follow-up Questions - What would the comparison look like if success probability were hypothetically 50%? - How could subscriber overlap make show-level audience revenue misleading?