Exploiting Options in Digital Media

During periods of rapid technological transformation like the current transition to digital media, firms must make investment decisions in a business environment that is hard to predict and fraught with risk. The new business opportunities that are emerging are essentially options for investment that can be analyzed using cutting-edge insights from finance. This course will develop practical tools for assessing, selecting and valuing these options.

Key Topics

  • Identifying options (investment opportunities) in the entertainment and media industry
  • How options create value: the value of information
  • Assessing risk: when is risk value-enhancing and when is it value-destroying
  • Trial projects: making investments to learn about the market, creating new options
  • How to value an option using market information
  • How to value an option using cash flow forecasts

Practical Application/Exercises

  • Valuing the option to make a movie, television or game sequel
  • Case study of digital channels- valuing unused bandwidth
  • Options in entertainment contracts: valuing exclusivity and right-of-first refusal terms
  • The role of options in choosing a distribution channel
  • Options in digital rights management
  • Understanding the option to cancel an agreement
  • Analyzing the option to distribute content across multiple channels

Learning Objectives/Benefits

  • Identifying options (investment opportunities) in the entertainment and media industry
  • Develop the ability to recognize and create new investment options
  • Choose projects wisely in an uncertain environment by exploiting the value of options
  • Trial projects: making investments to learn about the market, creating new options
  • Acquire practical tools for valuing options
  • Understand the strategic value of options in negotiating with customers and suppliers