1. BACKGROUND: OBAMA PUBLISHING CASE (A)

Molly Stern from Crown Publishing Group (CPG) needs to analyze the potential economics of publishing the book Becoming by Michelle Obama and recommend a bidding number that would allow CPG at least to break even on the basis of hard copy sales.

CPG is in a frenzied bidding war for the book Becoming - a likely blockbuster book currently under development by Michelle Obama. Bidding has already exceeded $15 million. In comparison, Bill Clinton's advance for his 2004 book My Lifewas $15 million, or about $21 million when adjusted for inflation. His wife Hillary Clinton received an advance of $11.5 million for Hard Choices in 2014.

To prepare for the auction, CPG management has hired this firm to provide an independent, objective perspective on the book's economic value (to CPG). CPG previously published President Obama's multimillion-copy bestsellers Dreams from My Father and The Audacity of Hope, as well as Mrs. Obama's 2012 illustrated book about the White House kitchen garden, American Grown, which was a #1 New York Times bestseller.

While all these books have been very profitable for CPG and their relationship with the Obama family is very important for them, they do not want to overpay. Crown Publishing Group management is financially conservative and is a proponent ofDiscovery Driven Planning (DDP).The company usesReverse Income Statements (RIS)to frame their thinking and use Assumption Checklists to keep track of pivotal and uncertain variables.

In this case, their specific requirement is that, at a minimum, Michelle Obama's hardcover edition should break even.They've said that any upside financial returns from derivative products (e.g., paperback, e-books or audio books) and follow-ons (e.g. movie rights, merchandise) should not be considered.

1. Draw and annotate an ROI Tree for an average CPG front list title.
2. Translate the ROI Tree into an Excel financial model of the P&L for Becoming
3. Use this Excel financial model to estimate results across a range of acquisition bid values
4. Fill in the spreadsheet
5. Case files and data
6. https://docs.google.com/document/d/1jCIsNF9se0wINtkK8GBu4ATnlFNyvVsd/edit?usp=share_link&ouid=110422872479342309114&rtpof=true&sd=true
7. Answer sheet to be filled:
8. https://docs.google.com/spreadsheets/d/1LSiHWW8I32AneS1ojAz0etZlJoHtrd_5/edit?usp=share_link&ouid=110422872479342309114&rtpof=true&sd=true