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WHCI (BUYER) NEGOTIATION STRATEGY

MOMS.COM

SYNDICATE 2

29111311 Haidir Afesina (fezi)

29111328 Hendra Winata

29111329 Mita Listyatri

29111338 Andek Prabowo29111344 Aprian Eka Rahadi

29111384 Chairunnisa Mirhelina

29111387 Franciscus Xaverius Kresna Paska

29111393 Agung Indri Pramantyo

MM5010

Strategic Decision Making and Negotiation

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Case Synopsis

Kim Taylor, GM of WCHI

Independent television station located in Chicago

Subsidiary of MULTIMED Inc (operates newspapers, magazines, film/video company)

Problem

Get the best price and terms for moms.com

WHCI rank 5th among all stationsaudience position has eroded because oflack of new productISSUES

HOLLYVILLE Inc released Moms.com

Ranking in the top 10 each week with 20 rating and 30 share in a prime time

24-54 years old women (45% audience & strong demographic)

Prime time slot i.e. 6pm

Advertising revenue is calculated based on demographic number

Competition

WILL (no 3rd, 10% market share, target young men)

WXYZ (the smallest station, has financial problem)

WWIN (market leader, currently has strong 6pm show

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BARGAINING ZONE Moms.com

Buyers Reservation Price

$60,000

Buyers Aspiration Price

$30,000

WCHI (BUYER)

Sellers Reservation Price

$35,000

HV(SELLER)

Sellers Aspiration Price

$70,000

Z O P A

$35,000 $ $60,000

License Fees

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BARGAINING ZONE Moms.com

Buyers Reservation Price

6 Runs/Day

Buyers Aspiration Price

8 Runs/Day

WCHI (BUYER)

Sellers Reservation Price

8 Runs/Day

HV(SELLER)

Sellers Aspiration Price4 Runs/Day

Z O P A

6 Runs/Day 8

Runs/Day

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BARGAINING ZONE Moms.com

Buyers Reservation Price

0 termBuyers Aspiration Price

6 terms (5 years)

WCHI (BUYER)

Sellers Reservation Price4 terms (3 years)

HV(SELLER)

Sellers Aspiration Price0 term

Z O P A

0 terms of payment 4

Terms of Payment

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BARGAINING ZONE

Buyers Reservation Price

$20,000

Buyers Aspiration Price

$10,000

Z O P A

$10,000 $ $20,000

Juniors

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DEAL possibilities:

a. NO DEAL, take BUYER BATNA with NET Revenue USD 3,000,000

b. DEAL Moms.com onlyc. DEAL Moms.com with Junior

ADVERTISING BUYER main revenue stream.Program Rate & Runs per Day affect net revenue from advertising.

CONTRACT INTEREST

BUYER INTEREST SELLER INTEREST

Minimize License Fee Moms.com Maximize License Fee Moms.com

Minimize License Fee Junior Maximize License Fee Junior

Maximize Program Runs/Day Minimize Program Runs/Day

Maximize Term Payment Minimize Term Payment

Maximize Program Rate

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If DEAL, both BUYER & SELLER would make revenue synergy > USD 6,500,000 Net Revenue BUYER > USD 3,000,000

Net Revenue SELLER > USD 3,500,000

ALTERNATIVES DEAL

BUYER ALTERNATIVE DEAL SELLER ALTERNATIVE DEAL

Revenue from other programs if NO DEALof Moms.com i.e. USD 3,000,000

Revenue from other programs if NO DEALof Moms.com with WCHI i.e. USD 2,500,000

Revenue if NO DEAL of Junior i.e. USD 0 Revenue if NO DEAL of Junior with WCHI

i.e. USD 1,000,000

(USD 10,000 x 100 episodes)

Total of NO DEAL = USD 3,000,000 Total NO DEAL = USD 3,500,000

TOTAL REVENUE NO DEAL BOTH PARTY i.e. USD 6,500,000

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#1 SENSITIVITY ANALYSIS of BUYER

Alternativ

es

Runs/Episo

de

Payment Terms

Year 0 Year 1 Year 2 Year 3#1 3 50% 30% 20% 0%

#2 4 60% 25% 15% 0%

#3 5 70% 20% 10% 0%

#4 6 80% 15% 5% 0%

#5 7 90% 7.5% 2.5% 0%

#6 8 70% 20% 10% 0%

#7 8 40% 60% 0% 0%

#8 8 50% 50% 0% 0%

#9 8 98% 2% 0% 0%

#10 8 50% 25% 25% 0%

RUNS & TERMS of PAYMENTAlternative

s

Runs/Epi

sode

Adjustment Rev

Moms.com*Adjustment Rev Junior**

#1 3 $(2,400,000) $(861,905)

#2 4 $(1,600,000) $(574,603)

#3 5 $(800,000) $(287,302)

#4 6 $0 $0

#5 7 $800,000 $287,302

#6 8 $1,600,000 $574,603

#7 8 $1,600,000 $574,603

#8 8 $1,600,000 $574,603

#9 8 $1,600,000 $574,603#10 8 $1,600,000 $574,603

RUNS PER EPISODE ADJUSTMENT

* Based on Case** Calculation in next slide

LICENSE FEE SENSITIVITY ANA LYSIS Key = Competitive Price compare to Runs/Day

ALTERNATIVES Moms.com License Fee Junior License Fee

#1 Moms.com $35,000 $10,000#2 Moms.com $40,000 $11,000

#3 Moms.com $45,000 $12,000

#4 Moms.com $50,000 $13,000

#5 Moms.com $55,000 $14,000

#6 Moms.com $60,000 $15,700

#7 Moms.com $60,000 $15,700

#8 Moms.com $60,000 $15,700

#9 Moms.com $60,000 $15,700

#10 Moms.com $60,000 $15,700

MOMS.COM LICENSE with JUNIOR PROGRAM

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#2 SENSITIVITY ANALYSIS of BUYER

Moms.com Net Revenue Calculation

*Net Revenue Calculated using Approximation as follow:= (RP License Fee Junior/ RP License Fee Moms.com) x Net Revenue Moms.com= (20,000/60,000) * 7,000,000

Rating Likelihood** Net Revenue Sub Total

2-3 65% 2,833,333 * 1,841,667

3-4 20% 3,166,667 633,333

4-5 10% 3,500,000 350,000

5-6 5% 3,833,333 191,667

6-7 0% 4,166,667 -

Total USD 3,016,667

Junior Net Revenue Calculation based on above table

EXPECTED REVENUE

ASUMSI RUNS/EPISODE

ADJUSTMENT NOTE

MOMS.COM 8,400,000 800,000 Per Run for more 1 run IF > 6 run/day

JUNIOR 3,016,667 287,301*** Per Run for more 1 run IF > 6 run/day

Moms. Com & JuniorRevenue Summary

Rating Likelihood Net Revenue* Sub Total

2-3 20% 7,000,000 1,400,0003-4 50% 8,000,000 4,000,000

4-5 10% 9,000,000 900,000

5-6 10% 10,000,000 1,000,000

6-7 10% 11,000,000 1,100,000

Total USD 8,400,000

** Assumption based on factthat Junior has lower ratingIn buyer case

***Adjustment Price Calculated using Approximation as follow:= (RP License Fee Junior/ RP License Fee Moms.com) x Adjustment Price Moms.com= 20 000/60 000 * 800 000

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PAYOFF TABLE WCHI(BUYER) & HOLYVILLE(SELLER) in USD*

DEAL FOR ALTERNATIVE #9HAS MAX REVENUE BOTH WCHI & HV WCHI (BUYER) Revenue = USD 6,036,410 > USD 3,000,000

HV(SELLER) Revenue = USD 6,908,887 > USD 3,500,000

OutcomeHollyville

Revenue

Hollyville

Net ValueWCHI Revenue WCHI Net Value

Revenue

HV+WCHISYNERGY Sort Rank

No Deal 3,500,000 - 3,000,000 - 6,500,000 USD

Moms.com with Junior

Alternative #1 with Junior 4,861,250 1,361,250 3,969,762 969,762 8,831,012 2,331,012 10

Alternative #2 with Junior 5,208,083 1,708,083 4,135,262 1,135,262 9,343,345 2,843,345 9

Alternative #3 with Junior 5,587,917 2,087,917 4,857,365 1,857,365 10,445,282 3,945,282 8

Alternative #4 with Junior 6,000,750 2,500,750 5,469,167 2,469,167 11,469,917 4,969,917 7

Alternative #5 with Junior 6,420,708 2,920,708 5,690,218 2,690,218 12,110,927 5,610,927 6

Alternative #6 with Junior 6,371,417 2,871,417 6,324,070 3,324,070 12,695,487 6,195,487 2

Alternative #7 with Junior 6,030,767 2,530,767 6,475,470 3,475,470 12,506,237 6,006,237 4Alternative #8 with Junior 6,182,167 2,682,167 6,399,770 3,399,770 12,581,937 6,081,937 3

Alternative #9 with Junior 6,908,887 3,408,887 6,036,410 3,036,410 12,945,297 6,445,297 1

Alternative #10 with Junior 5,898,292 2,398,292 6,589,020 3,589,020 12,487,312 5,987,312 5

Moms.com without Junior (SKIPPED)

Skipped DEAL Moms.com without JuniorBUYER have good calculation for Expected NET Revenue from Junior as described previouslyand SELLER offer competitive license price

* Calculation example in next slide

#3 SENSITIVITY ANALYSIS of BUYER

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CALCULATION EXAMPLE

FINANCIAL SENSITIVITYANALYSIS #9 KEY: Max Runs = Max Revenue from Adva. Licensing Fee per eipsode Total License Fee Expected Revenue

Moms.com $60,000 $6,000,000 $8,400,000Junior $15,700 $1,570,000 $3,016,667Runs/Episode 8

b. PaymentTerms Moms.com Deal

Payment Saving Cost (%)Saving Cost

($)

Year 0 98% $7,418,600 0% $0

Year 1 2% $151,400 10% $15,140Year 2 0% $- 20% $0Year 3 0% $- 30% $0

Total Saving Cost $15,140Runs/Episode Adjustment $1,600,000

Other Pieces of the Agreement (Junior) $3,591,270

NET REVENUE $6,036,410Value of Alternative Deal $3,000,000

NET VALUE OF BERGAINING AGREEMENT $3,036,410

#4 SENSITIVITY ANALYSIS of BUYER

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BUYER WORKSHEET AGREEMENT

NEGOTIATION DEAL

NEGOTIATION AGREEMENT WORKSHEET (ALTERNATIVE#7 BUYER)

1 Expected Revenue from Moms.com 8,400,000

Runs/Episode adjustment 1,600,000

If 4 subtract $ 1.600.000 from value

If 5 subtract $ 800.000 from value

If 6 make no adjustment

If 7 add $ 800.000 to value

If 8 add $ 1.600.000 to value

Net value of the show 10,000,000

2 Licensing FeeFee/Episode x 100 episodes Moms.com 6,000,000

Fee/Episode x 100 episodes Moms.com 1,570,000

Total Licensing Fee 7,570,000

3 Payment Savings

Payment in year 0*0.00 0

Payment in year 1*0.10 15,140

Payment in year 2*0.20 0

Payment in year 3*0.30 0

Payment in year 4*0.40

Payment in year 5*0.50

Total payment savings 15,140

4 Net Licensing fee of Moms.com 7,554,860

5 Other terms of the agreement specify: Junior Program 3,591,270 (+)

6 Net Programming Revenue of the deal 6,036,410(1)-(4)+(5)

7 Value of the Alternative deal 3,000,000

8 Net Value of the bargaining agreement 3,036,410 (6)-(7)

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ATTACHMENT - CALCULATION FOR Mom.com ONLY

PAYOFF TABLE WCHI(BUYER) & HOLYVILLE(SELLER) in USD

Moms.com without

Junior (SKIPPED)

Alternative #1 with

Junior 4,260,000 1,760,000 2,262,500 (237,500) 6,522,500 Rp22,500

Alternative #2 with

Junior 4,545,000 2,045,000 2,545,000 45,000 7,090,000 Rp590,000

Alternative #3 withJunior 4,891,250 2,391,250 2,792,500 292,500 7,683,750 Rp1,183,750

Alternative #4 with

Junior 5,237,500 2,737,500 3,040,000 540,000 8,277,500 Rp1,777,500

Alternative #5 with

Junior 5,583,750 3,083,750 3,287,500 787,500 8,871,250 Rp2,371,250

Alternative #6 with

Junior 5,845,625 3,345,625 3,581,250 1,081,250 9,426,875 Rp2,926,875

HollyvilleRevenue

Hollyville NetValue

WCHI Revenue WCHI Net Value Revenue HV+WCHI SYNERGY