Posted: November 9th, 2016

Southern Film Company (SFC) is preparing to make a bid for the rights to produce a cartoon version of the upcoming Star Wars movie “Rogue One”

Southern Film Company (SFC) is preparing to make a bid for the rights to produce a cartoon version of the upcoming Star Wars movie “Rogue One”. SFC is trying to decide whether to place a high bid of $21 million or a low bid of $12 million. SFC expects to be bidding against their major competitor, Northern Film Company (NFC) and predicts NFC to place a bid of $14 million with a probability of 0.3 or a bid of $10 million with a probability of 0.7. Advance ticket sales and pre-screening results for “Rogue One” suggest a 0.2 probability of the cartoon version being a blockbuster hit, a 0.35 probability of attendance for the cartoon version being average, and a 0.45 probability of the cartoon version being a flop. A blockbuster or average film would most likely represent net earnings of $120 million or $28 million, respectively, after all production and distribution costs are paid (except the cost of the movie rights). A flop will cover its direct production costs only (but not the cost of the movie rights). The company that wins the bid will be required to spend an additional $5 million to promote the Star Wars franchise, whether or not their movie is successful