Analysis of Royal Theater’s Practice of Showing Commercials Presenters: Dr. Rymsza and Dr. Gunther Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Agenda Background: Rymsza The Case for Fraud: Rymsza Survey Goals: Gunther Survey Results: Gunther Ethical Issues: Gunther Strategic Issue: Gunther Conclusions: Rymsza Recommendations: Rymsza Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Background A Patron (Tommy) is dissatisfied with his recent experience in a Royal Theater. Having to sit through 20 minutes of commercials before the movie actually started Allegation of fraud on Royal Theater’s part Threatens to file class action lawsuit. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Misrepresentation vs. Fraud Fraud distinguished from misrepresentation Prima facie case for fraud Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Prima Facie Case for Fraud A plaintiff alleging fraud must prove: A representation was made The representation was false When made, the representation was known to be false The plaintiff relied on the representation The plaintiff REASONABLY relied on the representation The plaintiff suffered damage (economic loss) as a result Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

False Assertion of Fact Assertion – “Movie begins at 1:00 pm” Assertion is false Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Knowledge & Intent Knowledge of the falsity Intent to deceive Theater sets starting times Intent to deceive Want Tommy to act on the given information Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Actual Reliance Complaining party acts on the assertion Tommy made sure he was seated by 1:00pm Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Justifiable (Reasonable) Reliance Reliance must be reasonable Starting time specified in: Newspaper ad Marquee Employee Movie ticket General public knowledge Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Damage – Economic Loss Damage resulting from reliance Opportunity cost - 20 minutes of lost time Nominal Punitive Damages Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

The Case for Fraud Conclusion: First four elements easy to establish Difficulty establishing reasonable reliance and damage Tommy HAS A WEAK case for fraud. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

How Widespread is Discontent with Commercials? Your theater’s reputation and financial viability depend on your patron’s opinions of this behavior. Objective – estimate the percentage of all theater patrons resenting commercials. If less than 5% resent the commercials, Royal Theater should consider going to trial and defending any lawsuit. If between 5% and 20% resent them, cut showing time of ads by 50% provided Tommy files lawsuit. If more than 20% resent the commercials, Royal Theater should consider settling with Tommy and discontinue ads. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Interpretation of 1st Survey Results A survey is a sampling of the population. Out of 100 responses: 12 patrons or 12% resent the commercials. We can be 95% confident percentage of moviegoers who resent commercials is between 5.6% and 18.4% Results indicate that Royal Theater should cut showing time of ads by 50% if Tommy files lawsuit. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Interpretation of 2nd Survey Results Out of 300 responses: 60 patrons or 20% resent the commercials. We can be 95% confident percentage of moviegoers who resent commercials is between 15.5% and 24.5% This answer extends across two of the decision rules: either cut the ads by 50% or discontinue ads entirely and settle with Tommy. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Ethical Issues Decision to state movie starting time as 1 p.m. Traditional View - Costs vs. Benefits Impact of decision on STAKEHOLDERS: patrons, owners of theaters, employees Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Costs Potentially agitated customers Potential legal liabilities Perception of “tricking” a captive audience to increase revenues Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Benefits Increased revenues Public service announcements Buffer grace period Entertainment Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Conclusions Survey a larger population before making any decision regarding Tommy’s lawsuit. Estimates of percentages will be more precise (smaller interval) making it clearer whether to reduce ads 50% or settle. Tommy’s case for fraud is weak, but Royal Theater should be prepared to respond. Royal Theater is behaving in an ethical manner, but opinions of patrons must be considered for longer term viability. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Conclusions: Royal Theatre Should Apply Strategic Thinking The Whole Picture: Long term changes in business environment that could affect Royal’s profitability: Consumer attitudes about commercials prior to films Economy Competing forms of entertainment Competing theatres Changing demographics Changes in government regulations A Sense of Direction: All of these could impact future decisions to show commercials. Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Long Term Recommendations Consider changing theater operations to avoid future lawsuits and attract more patrons Advertise movie starting times more clearly. Reconsider the number of commercials shown before each movie. Treat consumer complaints courteously Consider innovations to bring in more customers – “continuous improvement” Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems

Looney Consulting Group email - carpcon@marsnet.gone Where We Expect Our ClTelephone: 1-800-CaRP-CON Looney Consulting Group, Inc. Providing Complex Solutions to Simple Problems