Project Aurendale — Premium Network Valuation
A 2-hour Media / Premium Networks Board Materials case study with a complete model answer
Modeled After
LionTree
Board materials for a premium cable network: a content-company free cash flow bridge adding back amortization of programming rights against program rights payments and film and TV amortization against the investment itself, a voting versus non-voting premium study supporting a 3.0% discount, tax attributes subtracted from enterprise value, and accretion measured in DCF value rather than EPS
Structure and exhibit set are modeled after LionTree. The company, the financials and every figure in this case are entirely our own.
The Situation
Aurendale Networks, Inc. (Nasdaq: AURA / AURB) is a premium subscription network group.
Aurendale Networks, Inc.
- Sector
- Premium subscription networks and an in-house studio — a flagship premium network and two multiplex channels distributed through pay-television partners and a direct-to-consumer application, plus third-party licensing of completed programming
- Size
- Geography
- United States, with an international wholesale and direct-to-consumer business that adds a stated 1.05 million subscribers a year from FY2026E
- Ownership
- Situation
The Prompt
You are the financial advisor to the Board of Directors of Aurendale Networks, Inc. Stellhaven Media Group, Inc.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
The slate, the curves and the amortization schedule
PART 2
The content asset roll-forward, and why it has to tie
PART 3
Subscribers, rates and revenue, without a blended growth rate
PART 4
The bridge from EBITDA to cash
PART 5
The valuation, and what a multiple is struck on
PART 6
Two classes, a library, and the recommendation
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and Excel model are in the solution set below.
- 01
Tie the content asset before you build anything above it
- 02
Never net licensed and produced content
- 03
Put the bridge on a page, not in a footnote
- 04
Say what your normalized year means before you use the word
- 05
Print the multiple twice and say which one you read
- 06
Count the tax attributes once, and split the equity twice
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Content capitalization and the amortization curve
A content company pays for programming when it commissions or licenses it and charges the cost to earnings over the period the programming is expected to earn. The charge is not straight-line: viewing is heavily front-loaded, so the curve charges a large share in the first year and runs down from there. Two consequences follow. Cash leaves in one year and the charge arrives over several, so EBITDA and cash flow are two different statements about the same year. And the charge in any year is the sum of several vintages at different points on their own curves, which means it keeps rising after spend has stopped.
The content investment gap
Content cash spend less content amortization. It is positive whenever spend has been growing, because the charge in a year reflects a weighted average of smaller past vintages while the cash reflects today's larger one. It is a function of the GROWTH RATE of spend and very little else: hold spend flat for long enough and the gap goes to zero. That is why a single year's cash conversion is a fact about that year rather than about the business, and why a valuation that capitalizes one year's conversion is capitalizing a moment in a spend cycle.
The content asset as an accumulator
Opening balance, plus additions at cash cost, less amortization, equals closing. Every dollar of the distance between cash spent and cash charged is sitting in that balance, which is what makes the bridge auditable: a reader who can watch the asset move can check it without rebuilding it. It also explains why the balance grows faster than revenue during a build — that is the mechanical consequence of an accelerated curve applied to a compounding spend line, and it stops the moment the spend line does.
Licensed versus produced content
Licensed programming is bought from third parties, paid for on delivery or availability, and amortized over a shorter life. Produced programming is commissioned, paid for during production, amortized over a longer life, and leaves behind a library the company owns. The two behave differently in cash timing, in charge profile and in what they leave on the balance sheet, so a model that nets them into one content line is right in total and wrong in every year — and it cannot compute the steady-state relationship a terminal value needs.
Cash conversion, and why below one is normal
Cash conversion is EBITDA less content investment over EBITDA. For a content company in a build phase it sits below one, which is what growth looks like when the asset is capitalized. The question is whether it stays below one, and the answer is in the spend line rather than in the accounting. A company whose slate is still compounding will convert badly for as long as that lasts; a company whose slate has flattened will converge on one.
The residual value of a fully amortized library
A content library keeps earning after its amortization schedule has run out. The asset is carried at nothing and the revenue continues, decaying rather than stopping, which means a valuation that ends at the last year of the schedule throws away the part of a library that makes owning one worthwhile. It also explains why carrying value per title tells you almost nothing about what a library is worth: the balance sheet is dominated by the newest, most expensive vintages, and the back catalogue that produces steady cash is carried at close to zero.
Two multiples on one enterprise value
EV / EBITDA and EV / (EBITDA less content investment) are the same numerator over two denominators. They give the same answer for a company converting at the peer median and diverge exactly to the extent it does not, so the gap between the two prints measures the subject rather than the method. On a set where cash conversion sits below one, an EBITDA multiple prices earnings the business does not turn into cash — which is why the cash-basis multiple is the comparison of like with like, and why the EBITDA print is worth carrying only to show the size of the error.
Tax attributes and the enterprise value they sit inside
Loss carryforwards are worth the tax they shelter, discounted, and their use is often capped by an annual limitation. The observed enterprise value of a company that has them already contains the market's view of them, so a multiple struck on that enterprise value is comparing a company with attributes against a peer set without. Take them out before the multiple lands and add them back on their own line in a discounted cash flow struck at the full statutory rate. Either step alone double-counts them or throws them away.
The voting and non-voting classes
Where two classes have identical economics and differ only in votes, the market prices the vote — usually at a low single-digit discount on the non-voting stock. The evidence is a screened set of issuers whose classes are both listed, both freely traded and economically identical: an issuer whose non-voting class carries a dividend preference is pricing different economics, one whose non-voting float is tiny is pricing liquidity, and one in an announced transaction is pricing deal terms. The discount then allocates ONE equity value between the classes; applying it to the cash flows would value the business twice.
Accretion measured in value rather than in earnings
Acquiring a completed content library is the clearest case in which earnings per share and value point in opposite directions. The library has already been made, so the price is the whole of the investment and the amortization that follows is a schedule rather than a cost of anything; it depresses reported earnings for years while the cash it produces starts immediately. A Board that decides such a transaction on earnings per share has decided it on the amortization schedule, which is a presentation of a price it has already paid.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Content company free cash flow bridge
- —Programming rights amortization versus payments
- —Production slate and library analysis
- —Voting versus non-voting share discount
- —Tax attributes subtracted from enterprise value
- —DCF-value accretion in place of EPS accretion
Answer Deck
Full model answer, banker-formatted
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Aurendale — Premium Network Valuation
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is EBITDA struck after the content charge rather than before it?
Because that is where it sits in the filings. A premium network's programming amortization runs through cost of revenue, so it is inside EBITDA by construction, and every peer multiple you can observe is struck on that basis. Adding it back inside EBITDA produces a number no filing reports and no multiple is struck on, and it hides the exact distance the exercise exists to measure. Add it back in the BRIDGE, where the cash spend comes out beside it, and the reader can see both halves.
What actually drives the gap between EBITDA and cash?
The growth rate of content spend, almost entirely. The charge in a year is a weighted average of past vintages running down their curves; the cash is today's vintage in full. When spend compounds, today's vintage is bigger than the average of the ones being charged, and the difference is the gap. Hold spend flat and the gap collapses. That is why the gap is a growth artifact rather than a quality-of-earnings problem, and why the year the slate flattens matters more to cash flow than anything in the operating model.
How do I set a terminal value on a business like this?
Work out what the amortization would be if spend had been compounding at your perpetuity rate forever. For a fixed curve that is a determinable share of the year's spend, and one less that share is the steady-state gap. Build a normalized year on that relationship, and then also show what growing the last forecast year's own free cash flow would have produced. The difference between the two is the size of the build-phase gap you would have perpetuated, and it is worth putting on the page as a number.
Which multiple should I put in front of the Board?
The one struck on the cash, and say so out loud. Print both on the same peer set and the same enterprise values, state the gap between them as a number, and note that the two agree for a company converting at the peer median. Carrying the EBITDA print as a reference is worth doing — it shows the size of the error rather than asserting it — but a summary that gives the two bars equal weight has claimed that a multiple of a number the business does not generate is the same kind of evidence as a discounted cash flow.
Where do the tax attributes go?
Both places, once each. Strike the discounted cash flow at the full statutory rate and add their present value on its own line; then subtract that same present value from every observed enterprise value before you divide by anything. The peer set has no comparable attributes, so leaving them inside the multiple compares a company that has them against companies that do not. The test that you have done it right is that they appear exactly twice in the workbook and never inside a denominator.
How do I support a discount on the non-voting stock?
With a screened set of issuers whose two classes are both listed, both freely traded and economically identical, and with the discount computed from the observed closes rather than assumed. Then say which statistic of that set you applied, state the rounding rule and the direction it runs, and apply it to the EQUITY VALUE rather than to the cash flows. Aurendale's own spread is one observation on one day and it corroborates the study; it is not the study.
Is the library acquisition a good idea if it hurts earnings per share?
Compute both and say which one decides it. The library is already made, so the price is the whole of the investment and the amortization that follows is a schedule attached to a price already paid — it is a tax shield and nothing else. The cash starts immediately and continues after the schedule runs out, which is where a large part of the value sits. If your two measures disagree, that disagreement is the finding, and the deck should say which measure the Board should decide on rather than presenting both neutrally.
What should the sensitivity grids test?
Pair a volume driver with a margin driver. On this business that means a subscriber count against the cost of an original programming hour: one moves revenue and the other moves content cash spend, so the grid is two-dimensional. Two drivers that only ever enter through their product — a subscriber count against a rate, say — produce a grid that is one axis wearing two labels, and it will pass every standard test of a grid because every cell is correctly computed. Check two cells that share an axis sum before you ship one.
How long should the presentation be?
Short enough that the Board reaches the recommendation. This is a two-hour exercise and the workbook consumes most of it, so what you hand back is the submission a strong candidate produces rather than a book a bank sends a client. Lead with the answer, put the bridge behind it, keep the roll-forward on the page rather than in an appendix, and make sure every exhibit that quotes a normalized figure states the basis it is struck on.
About This Media / Premium Networks Board Materials Case Study
Media / Premium Networks Board Materials case study for investment banking interviews. 120-minute format covering content company free cash flow bridge, programming rights amortization versus payments, production slate and library analysis. Includes the full prompt, a model answer deck, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Media & Telecom. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
120-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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