1. Analysis of Royal Theater’s Practice of Showing Commercials
Presenters: Dr. Rymsza and Dr. Gunther
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2. Agenda Background: Rymsza The Case for Fraud: Rymsza
Survey Goals: Gunther
Survey Results: Gunther
Ethical Issues: Gunther
Strategic Issue: Gunther
Conclusions: Rymsza
Recommendations: Rymsza
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3. 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.
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4. Misrepresentation vs. Fraud
Fraud distinguished from misrepresentation
Prima facie case for fraud
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5. 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
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6. False Assertion of Fact
Assertion – “Movie begins at 1:00 pm”
Assertion is false
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7. Knowledge & Intent Knowledge of the falsity Intent to deceive
Theater sets starting times
Intent to deceive
Want Tommy to act on the given information
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8. Actual Reliance Complaining party acts on the assertion
Tommy made sure he was seated by 1:00pm
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9. Justifiable (Reasonable) Reliance
Reliance must be reasonable
Starting time specified in:
Newspaper ad
Marquee
Employee
Movie ticket
General public knowledge
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10. Damage – Economic Loss Damage resulting from reliance
Opportunity cost - 20 minutes of lost time
Nominal
Punitive Damages
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11. The Case for Fraud Conclusion: First four elements easy to establish
Difficulty establishing reasonable reliance and damage
Tommy HAS A WEAK case for fraud.
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12. 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.
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13. 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.
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14. 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.
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15. 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
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16. Costs Potentially agitated customers Potential legal liabilities
Perception of “tricking” a captive audience to increase revenues
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17. Benefits Increased revenues Public service announcements
Buffer grace period
Entertainment
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18. 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.
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19. 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.
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20. 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”
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21. Looney Consulting Group-
Where We Expect Our ClTelephone: CaRP-CON
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